A Study on the Non-performing Loans Market in China

Abstract

In 2008, the subprime mortgage market in the US collapsed as a result of falling housing prices, and kicked start a global financial crisis. Growing at a fast rate, the subprime mortgage market had accumulated a high level of risks before its collapse. In the post-global crisis period, the non-performing loans (NPLs) market in China experienced similar growth, leading to concerns of potential failure. This paper, with reference to the US subprime market in the 2000s, develops an explanation of the risks related to the Chinese NPLs market, by identifying the trend and the causes of the growth. This paper then evaluates the corresponding prevention measures in terms of corporate governance and government regulations. The findings of this research suggest that the risks in the Chinese NPLs market will remain at a controllable level, while further measures are required to make the market vibrant.