China’s Non-Performing Loans Revisited

  • Email
  • Print
  • Printing Articles

    1. Click here to print!
    2. ...or print directly from your browser by choosing File > Print... from the menu or by pressing [Ctrl + P]. Our printer-friendly stylesheet will make sure extraneous website stuff isn't printed.
    3. You're done!

    Close this message.

  • Comments
  • RSS

Almost two years ago, Kaulkin Ginsberg wrote that there were potentially sizable, albeit risky, collection opportunities in China. Since that blog, China’s non-performing loan (NPL) market has grown substantially and caught the eyes of notable investors – such as Wilbur Ross, chairman of private-equity firm WL Ross & Co. – and reporters in the U.S.

It cannot be overlooked any longer: there are sizable bad debt collection opportunities within China’s credit economy.

According to Bloomberg News, data compiled by the China Banking Regulatory Commission indicates there was about 1.39 trillion yuan – or $211 billion – in NPLs in March 2016. When Kaulkin Ginsberg highlighted this topic in 2014, the total was around 700 billion yuan – or $100 billion. Less than two years later, this amount has nearly doubled.

In fact, MarketWatch stated that the current Chinese debt bubble is even larger than the U.S.’ 2007 subprime bubble, which led to financial institutions charging off massive amounts of delinquent consumer debt, driving U.S. ARM industry growth in subsequent years, as we noted in our recent market intelligence series on the financial services industry. Through a broad comparison, the revenue potential in China’s debt market is staggering.

Additionally, China recently took steps to ease foreign access to its interbank bond market, most notably by removing requirement quotas for many types of oversea financial institutions. This announcement has been considered a major step for foreign access to various parts of the China’s economy, and it may be a catalyst for future investment and collection opportunities for the U.S. ARM industry.

When it comes down to it, a member of the ARM industry must decide if the potential rewards of entering the Chinese debt market outweigh the risks and costs – both in terms of the compliance and regulatory differences between the U.S. and China, but also in understanding how to effectively recover worthwhile amounts of NPLs from a significantly different population and culture. Considering the substantial growth of China’s NPLs over the past two years, members of the ARM industry should monitor the development of China’s credit economy and NPL market.

  • Email
  • Print
  • Printing Articles

    1. Click here to print!
    2. ...or print directly from your browser by choosing File > Print... from the menu or by pressing [Ctrl + P]. Our printer-friendly stylesheet will make sure extraneous website stuff isn't printed.
    3. You're done!

    Close this message.

  • Comments
  • RSS

Posted in Accounts Receivable Management, ARM in Focus, BPO, Debt Collection, The Economy .

×
Subscribe to our email newsletters

Continuing the Discussion

We welcome and encourage readers to comment and engage in substantive exchanges over topics on insideARM.com. Users must always follow our Terms of Use. Also know that your comment will be deleted if you: use profanity, engage in any kind of hate speech, post an incoherent or irrelevant thought, make a point of targeting anyone, or do anything else we find unsavory. Your comment will be posted under your current Display Name, shown below. If you'd like to change your Display Name, you must update it on the My Profile page.

Leave a Reply