Foreign investors' impatience with the mainland's slow rate of disposal of bad bank loans has become even more obvious in recent months.
US-based Lone Star, one of the bigger international buyout firms has, for instance, announced it will close its Beijing office and focus on prospects elsewhere in Asia. Keeping such defections from becoming a trend may have become more of a priority for Beijing, judging from this week's announcement that streamlined rules for the purchase of non-performing loans will be introduced next month.
Under the new procedures, a deal would have to be registered with the State Administration for Foreign Exchange within 20 days of its completion. That is a drastic change from the prevailing rules, which require approval from no fewer than four ministries.
If the relaxed requirements help pry open a market that has been frustratingly closed to many foreign investment banks and financial institutions since the mainland embarked on its disposal programme five years ago, there may be a chance to keep these investors interested. In addition to the current portfolio of more than 1 trillion yuan in bad loans that the four state-owned asset management companies are working through, there are likely to be even more newly defaulted loans that need to be taken on in future.
Activity may pick up in the next few years as state-owned banks queue up to list on international stock markets and need to improve their balance sheets by offloading non-performing debt. The capital and expertise that these international firms bring will be indispensable, given the size of the problem. At the current pace disposal will take decades, with an additional danger being that foreign financial institutions will lose interest long before that.
Streamlined approval is important, although there are other areas to be looked at. Minimum prices are now set at the state level and field offices of the asset-disposal firms in the provinces have limited autonomy in arranging deals, stumbling blocks that have kept deal flow at a trickle since an initial, hopeful burst of activity in 2001. Any regulatory changes aimed at decentralising and speeding up the decision-making process should also address these concerns.