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A branch bank in Shanghai has come to an agreement with two auctioneering firms to dispose of non-performing assets.
Under the agreement, the Shanghai Auction Co. Ltd and the Shanghai Huaxing Auction Ltd. will help the Bank of China's Shanghai Branch dispose of non-performing assets including land, real estate, machinery and stocks.
The auctioneers will conduct a comprehensive evaluation of the assets and work out a detailed disposal plan for the bank's approval before the auction or liquidation takes place.
"This will be the first time the Bank of China (BOC) has worked long-term with auctioneering firms to dispose of bad assets," said Liu Jinjun, an official with the branch bank.
Insiders say the open, fair and impartial auction market will help liquidate non-performing assets, improve transparency of the disposal process and minimize the bank's losses.
The high proportion of non-performing assets has long haunted China's commercial banks, particularly the four leading state banks.
Official statistics show that non-performing assets reported by the Industrial and Commercial Bank of China, the China Construction Bank, the Agricultural Bank of China and the Bank of China totaled 1.8 trillion yuan (US$217 billion) at the end of 2001, or 25.4 percent of their total assets.
By the end of last year, the four state-owned asset management companies founded in 2000, namely Huarong, Xinda, Changcheng and Dongfang, had removed 1.4 trillion yuan (US$170 billion) of non-performing assets from the four leading state banks.
But a central bank specialist has reservations and queried such practices.
"Such non-performing assets should be liquidated by the banks rather than being taken from them," said Xie Ping, a research fellow with the banking research sector of the People's Bank of China.
Since the start of this year, most state banks have been liquidating their bad assets.
In June, the Shanghai Branch of China Construction Bank (CCB) auctioned mortgage assets with a face value of 525 million yuan (US$63 million) and liquidated some 305 million yuan (US$36.7 million), or 58 percent of the total non-performing assets.
Liquidation returns are nearly 20 percent higher than what would have been made by an asset management company, said a CCB official.
The CCB held week-long auctions in 24 cities across the country including Shanghai, Guangzhou, Chongqing and Wuhan.
(Xinhua News Agency August 22, 2002)
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