Non-performing loans in Asia are a subject of concern to investors. The West has spent years cleaning up its savings and loan scandals, and tightening up credit risk assessments. In Asian cultures, where "favor" with important people and networks is even more important than in Europe and the US, it is hard not to think that their ratios of non-performing loans would exceed what was found in the US. The non-performing loans that came to the surface after the meltdown in Thailand are still being cleaned up. And since cronyism and corruption are still very much part of the culture in China it is more than likely that the problem is not being dealt with as strongly as western investors would hope. Two factors influence this - the lack of a risk assessment culture and trained professionals, and the will to do it (would not help their balance sheet).
An article in the New York Times describes the firing of the senior risk advisor (an American) who repeatedly tried to warn about the hiding of non-performing loans at China's largest state-owned bank, the China Construction Bank. So it looks like this: a Chinese bank wants to raise capital, so hires a senior risk officer to give the impression that risk assessment is under control and properly done. The risk officer warns about irregularities, and gets fired. After all the stories we have read in the last 20 years about savings and loans, whisleblowing in banks and companies, it is hard to believe that there would not be some truth in this matter.
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