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China's debt-ridden state-owned commercial banks should open up to private investment to attract capital and help clear up the growing number of non-performing loans on their books, advised several delegates attending seminars yesterday related to the 35th annual meeting of Asian Development Bank.
Delegates attending the event here in Shanghai said the bad-loan problem must be solved to provide a spur to China's economic development.
Officials from the ADB Institute, a research arm of the bank, said that China's four biggest state-owned commercial banks - the Industrial and Commercial Bank of China, the Bank of China, China Construction Bank and the Agricultural Bank of China - shouldn't simply transfer their bad debt to asset management companies.
"There are few, if any, examples of countries with a similar size of non-performing loans having successfully grown out of their problems," said Masaru Yoshitomi, dean of the ADB Institute. "A large stock of NPLs makes banks reluctant to lend, even to viable firms, causing a credit crunch and economic stagnation."
It is estimated that Chinese banks have about 3 trillion yuan (US$361.5 billion) in bad loans on their books, which is equal to 25 percent of total loans.
"In terms of distribution among banks, the big-four banks have about 60 percent of the total," said Li-Gang Liu, a research fellow with the ADB Institute.
The big four banks' preferred solution of transferring bad loans to asset management companies isn't working.
Take China Construction Bank for example. Its asset management company has only disposed of about 10 percent of the bad loans absorbed from the bank since the late 1990s.
Instead, banks should diversify their ownership, said ADB Institute officials.
"The suggestion is based on the fact that there are many mature private enterprises and a huge sum of individual deposits on China's mainland," said Yoshitomi.
Yesterday also saw Chinese Finance Minister Xiang Huaicheng meet ADB President Tadao Chino.
"China has done much preparatory work for the annual meeting, and is confident it will be successful," said Xiang.
Chino expressed his appreciation and thanks for the Chinese government's outstanding contributions to the meeting. The world will learn still more about China's achievements through this meeting, he added.
Today, eight top Chinese officials will deliver speeches and lead an in-depth discussion on China's economic and social development.
The week's main event, the 35th annual meeting of the ADB, begins tomorrow and runs through Sunday. Delegates will discuss the economic situation in the Asia-Pacific region, aid for the reconstruction of Afghanistan and continued efforts to alleviate poverty.
This is the second time China has hosted an ADB annual meeting. In 1989, Beijing held an ADB meeting.
(eastday.com May 9, 2002)
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