Almost all capitals including circulating capital and

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Unformatted text preview: s in China since 1978 could be divided into five stages. Stage I: 1978-1983 There was almost no NPLs at this stage. Although Chinese economic reform started in 1978, it is at the early stage and the main characteristic of the economy is still the traditional planned economy. Under the planned economy, state-owned enterprises (SOEs) accounts for a very large share in the whole economy. Almost all capitals including circulating capital and fixed asset investment needed by SOEs were supplied by fiscal appropriation, which is intermediated through banks. The finance department appropriated a fixed amount of circulating capital to the SOES each year. The fixed assets investment of SOEs was also controlled by the government. There were actually no commercial banks at this stage. The role played by the banks is the treasurer of the Ministry of Finance. SOEs never applied for the loan unless the circulating capital they needed exceed the amount appropriated by the government. Hence, the size of bank credit was very small. The total loan to the industrial enterprises was only RMB 48.7 billion in Table�1�NPLs�of�Stated-owned�Commercial�Banks�Between�1985�and�2005 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Loan (RMB billion) NPLs (RMB billion) 476.61 0.203 590.56 1.286 759.08 9.027 903.25 85 1055.13 111 1240.93 156 1516.64 174 1804.41 186.2 2161.56 421.62 2646.11 515.56 3244.13 819.3 3939.34 968.34 4743.437 1427.2 5931.75 1571.35 6844.21 2262 7369.58 2400 7233.3 2185.2 7500.7 2115.2 7966.8 2088.1 9414.5 1916.8 10116.25 1575.1 10223.83 1072.48 NPL/GDP (%) 0.03 0.14 0.88 7.11 7.44 9.23 9.38 8.61 15.83 14.89 17.52 16.56 21.02 21.10 28.87 29.24 24.42 21.74 21.38 18.23 9.85 5.88 Source: Zhao Yi (2001) Liu Mingkang’s talk on May 29, 2003 China Banking Regulatory Commission, www.cbrc.gov.cn China Statistical Year Book, www.stat.gov.cn NPL/Loan (%) 0.04 0.21 1.19 9.41 10.52 12.57 11.47 10.31 19.51 19.48 25.25 24.58 30.08 26.50 33.05 32.56 30.21 28.2 26.21 20.36 15.57 10.49 研 究 所 年 報 136 Figure�3��Evolution�of�NPL�in�SOCBs�(RMB�billion) 3000 2500 2000 1500 1000 500 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 1981, RMB 52.7 billion in 1982, and RMB 59.7 billion in 1983. Accordingly, the amount of NPLs is also negligible during this period. Stage II: 1984-1991 During this stage, NPLs started to rise. The amount of NPLs increased from RMB 0.203 billion in 1984 to RMB 186.2 billion in 1991 while the ratio of NPLs to total loan rapidly increased from 0.04 percent in 1984 to 10.31 percent in 1991. A s the economic reform progressed, the share of market economy began to increase. The private companies could only get the capital through banking credit, instead of “fiscal appropriation”. In order to improve the efficiencies of SOEs, Chinese government started to reform SOEs. One of the most important measures of reform is to change the way SOEs obtaining capital. All of the cir...
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