The accumulation of NPLs in China has been caused by the dominant role of State banks in China's financial markets, weak internal controls within State banks, policy loans to state owned enterprises, unnecessary administrative controls on banks' lending activities, and inappropriate banking regulation and supervision.
The author draws on experiences at national, regional and international level to make recommendations for the development of better workout procedures for existing NPLs. He also examines the role of banking regulation and supervision in preventing accumulation of NPLs and in avoiding the impact of NPLs on the stability of the banking system and the conditions of market discipline.