Capital Market Development: China and Asia Seminar Series — Hidden Non-Performing Loans In China

COLLABORATING ORGANIZERS

Asset management companies (AMCs) have been widely used around the world for more than two decades to remove non-performing loans (NPLs) from troubled banks and resolve them outside of the banking sector. Yet, systematic evidence for how this AMC model works has been scarce due to narrow and limited use cases. In recent research, Tianyue Ruan and her co-authors use proprietary data from NPL transactions in China to study the effectiveness of the AMC model in NPL resolution. Join us for a conversation moderated by Chang-Tai Hsieh discussing their findings, which suggest that an unregulated resolution mechanism in an environment with binding financial regulations may distort banks’ incentives to simply conceal distressed assets.

About the Seminar Series

Financial market development goes hand-in-hand with economic growth. The development of China’s capital markets in terms of size, regulations, capability, and efficiency has been impressive. China may now even lead globally in some dimensions, notably e-payments systems. Yet, China’s capital markets are still a work-in-progress facing both generic and unique challenges. Other Asian capital markets have even greater uneven development. Some in advanced Asian economies have acquired globally acclaimed reputation and capabilities while various regulatory and structural weaknesses dwarf others. Corporations and investors have been inclined to arbitrage cross-border regulatory and developmental gaps; so the very uneven status of capital markets across Asia is a policy issue for the governments in the entire region and perhaps globally. Analyzing the positive and negative lessons in the functioning of Asia’s capital markets, and identifying reforms and applications of technology that could further improve Asian capital markets’ allocation efficiency, financial inclusion, and forewarning against reforms that might cause problems can benefit practitioners, policymakers and researchers, and can contribute significantly to overall prosperity.

The ABFER and the University of Chicago’s Becker Friedman Institute China (BFI-China), in collaboration with National University of Singapore (NUS) Business School, Shanghai Advanced Institute of Finance (SAIF), The Chinese University of Hong Kong (CUHK) Department of Economics, CUHK-Shenzhen and Tsinghua University PBC School of Finance (Tsinghua PBCSF), hope to provide a virtual network to benefit researchers, policymakers, and practitioners from Asia and beyond.