Non-performing Assets in China Hit 5.21 Trillion Yuan, Rise over 62% at Non-Bank Financial Institutions: PwC Report

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A new report from PricewaterhouseCoopers China points to a rapid rise in non-performing assets in the country, especially amongst non-bank financial institutions.

China’s non-performing assets rose by 900 billion yuan, or 21%, in 2020 to reach 5.21 trillion yuan, according to the “China Non-Performing Asset Management Sector Reform and Development White Paper” (中国不良资产管理行业改革与发展白皮书) released by PwC China on 25 August.

Non-performing assets at non-bank financial institutions saw an especially rapid increase, rising by 62.9% in 2020 compared to 2019, and greatly outpacing growth at non-financial enterprises and commercial banks.

PwC said that commercial banks still account for the biggest share of non-performing assets in China, with a non-performing loan balance of 2.7 trillion yuan.

The non-performing assets of non-bank institutions are mainly the result of trust projects, non-standard debt, P2P online lending and financial leasing, while for non-financial enterprises they are mainly in the form of accounts receivable and entrusted loans.

According to the report the non-performing assets market has seen an ongoing rise in activity, with the number of local asset management companies rising to 58 in total, with total registered capital of more than 200 billion yuan and total assets of over 600 billion yuan.

Foreign invested asset management companies are becoming active in more developed parts of China such as the Yangtze River Delta and the Pearl River Delta, and stepping up cooperation with local service providers.

A large number of private, unlicensed institutions are also engaging in cooperation with various asset management companies and service providers, further expediting the circulation of non-performing assets.

The big three asset managers of China Cinda Asset Management, China Orient Asset Management and China Great Wall Asset Management had collective assets of 3.29 trillion yuan as of the end of 2020, for an increase of 1.3% compared to the previous year.

Their average capital adequacy ratio increased by 1.44 percentage points compared to the start of the year to reach 16.56%, while their full year operating revenues were 250.4 billion yuan, for a YoY rise of 1.6%. Net profits were 27.5 billion yuan for a YoY increase of 2.9%.

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