China Construction Bank (CCB), one of the country's four largest state-owned commercial banks, said its outstanding amount of non-performing loans (NPLs) dropped 31 billion yuan (US$3.7 billion) during the first nine months of this year.

The bank's NPLs stood at 11.92 percent, by the end of September, a drop of 3.98 percentage points from the beginning of the year according to the international standard of five category classification.

Yang Xiaoyang, head of the bank's Asset Preservation Department, said his bank has always given great attention to improving asset quality and business efficiency, and dropping the amount of non-performing assets.

The bank plans to reduce the NPLs by 4 percentage points this year, Yang said.

"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 the domestic stock exchanges," he said.

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. In July, the bank signed an agreement with the investment bank Morgan Stanley of the United States 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 relevant government departments including the central , the China Banking Regulatory Commission and the Ministry of Finance, Yang said.

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

The bank is also trying to sell some mortgaged assets through online auctions to recover more assets.

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

(China Daily October 22,2003)