China’s Banks 2012 Harvard Case Solution & Analysis

In the 1990s, significant disagreement arose concerning stability and the strength of the banks of China. Many SOEs were experiencing financial problems and they might thus not have been able to repay these loans. Some analysts stressed that since the banks and the SOEs were both owned by the authorities, the only relevant issue was the fiscal mettle of the government and its readiness to take responsibility for those loans of the bank, which are non-performing. In 21st century’s initial years, the government of China initiated a widespread program in order to improve its balance sheets in the banks by purchasing of their loands that are non-performing so as to resell them at a reduced rate, often to foreign private sector financial institutions.

Prior to 2010, this process provided a generally approved religion in the stability and security of China's banks. The year 2010 brought a brand new realization that the non-performing loan problem had reappeared. Nonetheless, China's banks had private including government investors, and so the alternative had become more complicated. The government's response was to insist that China's banks raise their capital base by issuing new equity.

Publication Date: 09/24/2010

This is just an excerpt. This case is about Finance

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