The 2006 Ernst & Young “Global Nonperforming Loan Report 2006” does point out though that almost every country covered in the 2004 edition of the report—with the notable exception of China—has managed to reduce its “legacy NPLs” (loans made before 1997). There are signs even in China that transaction activity may be on the rise. China is poised to allow foreign investors access to its banking industry and, despite a slow start, the NPL disposition process has accelerated there in the last 12 months.
However, considering Ernst & Young’s own conservative estimate of the actual depth of China’s total NPL exposure—at US$900 billion, substantially more than any other country in the report—and the large numbers of legacy (pre–1997) loans still to resolve, China’s NPL problems appear far from over. As reported, China’s overheated property markets are certain to produce fresh NPLs in coming years. |