China Construction Bank (CCB) said yesterday it disposed of 37.7 billion yuan (US$4.6 billion) of bad assets during the January-July period, and recovered assets worth 23.3 billion yuan (US$2.8 billion), of which 20.5 billion yuan (US$2.5 billion) was cash.

By the end of July, the bank's non-performing loans, measured by the international standard of five-category classification, stood at 12.23 percent, dropping from the 15.36 percent at the end of last year.

The bank plans to dispose of up to 55 billion yuan (US$6.6 billion) of bad assets this year and reduce the non-performing loans (NPLs) by 4 percentage points, said Yang Xiaoyang, head of the bank's Asset Preservation Department.

"We have to speed up disposing of the non-performing assets, because we want to become the first State-owned commercial bank to be listed on domestic stock exchanges," he said. It is reported that the bank seeks to list next year.

Bank President Zhang Enzhao said the bank aims to drop the NPL ratio to less than 10 percent within two years.

"To achieve this goal, we will have to explore new ways to dispose of the bad assets," Yang said.

The bank is trying to develop an information management system to conduct an online auction of mortgaged assets, he said.

Last month, the bank signed an agreement with US investment bank Morgan Stanley to jointly dispose of 4.3 billion yuan (US$518 million) worth of non-performing assets.

But the project has yet to be approved by relative government departments including the central People's Bank of China, the China Banking Regulatory Commission and the Ministry of Finance, Yang said.

"The deal, if approved, would help us move faster in disposing of the non-performing loans," he said.

Huang Jinlao, a senior researcher with the International Financial Research Institute, said Chinese commercial banks would have to lower NPL rates to get rid of historical financial burdens and raise their capital adequacy to international standards, because more and more foreign financial institutions have begun to enter the Chinese market.

(China Daily August 27, 2003)