中国不良贷款市场报告-2023 China NPL Market Report

2023ChinaNPLMarketReport

Contents

1NoticetoReaders

2Chapter1:MarketUpdate

4NPLBalanceinChinaCommercialBanks

5ProvincialNPLBalance

6Chapter2:OverviewofRecentNPLTransactions

6NPLBid&TransactionTrend

6BreakdownofNPLTransactionVolumebyMarket

9DistributionofNPLBid&TransactionVolume

10PersonalNPLMarket

12Chapter3:OverviewofOnlineNPLAuctions

13Chapter4:OverviewofOnlineCollateralJudicialAuctions

13OverallAuctionSummary

15AuctionsbyAssetType

17JudicialAuctionOverviewinZhejiang&GuangdongProvince

19SponsoringOrganisations

2023ChinaNPLMarketReport

Apublicationfrom:

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NoticetoReaders

CHINANPL–MARKETREPORT

ThisReport,undertakenjointlybyZheshangAssetResearchInstituteandPepperGroup(China)providesreaderswithabetterscopetounderstandthedynamicsandrecentactivitieswithinChina’sNPLmarket.ThefirsteditionwasreleasedinAugust2020andwillbepublishedonasemi-annualbasistofocusoncurrentgovernmentregulationsandpolicies,recentindustryactivities,insightsintotheprimaryandsecondaryNPLmarketsandtheonlinejudicialauctionmarket.

LiChuanquan

DeputyChairmanofZheshangAMCCSOofZheshangAMC

DeanofZheshangAssetResearchInstitute

KarenChen

CEOofPepperChina

Co-HeadPrincipalInvestmentsAsiaPepperGroup

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Chapter1:NPLMarketUpdate

“China’slenderswillmaintainthesteadygrowthmomentumin2024,withfinancialresourceallocationtobeoptimizedfurther.Thecountry’ssoundlong-termfundamentalswillremainunchanged,andtheimprovingfundamentalsandnewgrowthopportunitiesareexpectedtoboostthedevelopmentofthebankingsector”.

TheChinaBankingandInsuranceRegulatoryCommission(CBIRC)[1]andthePeople'sBankofChina(PBoC)jointlyissuedTighterAssetRiskClassificationRulesforCommercialBanks

CHINANPL–MARKETREPORT

Onthe11thofFebruary2023,China’scentralbankandbankingregulatorupdatedRulesrequiringcommercialbankstoevaluateandclassifycreditriskmorepromptlyandprudentlyandprioritizedebtors’abilitytomeettheirobligationsoverunderlyingcollateralvalues.TheupdatedRulesexpandstheexistingfive-categoryriskclassificationfromloanstoallfinancialassetsexposedtocreditrisk,includingbondinvestments,interbanklending,entrustedinvestments,andasset-backedsecurities,coveringtherisksofalltheiron-balance-sheetandoff-balance-sheetfinancialassetsthatbearcreditrisk.Theexpansionofthescopeofriskclassificationwillhaveanimpactonindicatorssuchasthenon-performingloan(NPL)rateandtheprovisioncoverageratio.

TheRulesforriskclassificationoffinancialassetsareintendedtopromotecommercialbankstoaccuratelyassesscreditrisksandtrulyreflectthequalityoffinancialassets.TheRulesaimtofurtherpromotecommercialbankstoaccuratelyidentifyrisklevelsandimplementassetriskclassification,whichwillhelpthebankingsectoreffectivelypreventandresolvecreditrisksandimprovethelevelofservingtherealeconomy.Forsomesmallandmedium-sizedbankswithpoorassetqualityandweakrisk-resistanceability,theRuleswillbringaboutcertainpressuresduringtheimplementationprocess,andthebanks'demandforthedisposalofNPLswillbeelevated.

Comments:Forassetmanagementcompanies(AMCs),thescaleofNPLsonthesupplysidewillincrease,andmoreopportunitiesforrestructuring,mergersandacquisitionswillarise,thisisinadditiontothegrowthofsmallandmedium-sizedbankbail-outsopportunities.Ontheotherhand,theincreaseddiversityofNPLsfromcommercialbanks,thelargermarketsize,andthedifferenceinvaluationandpricinglogicfromtraditionalNPLs,willposehigherprofessionalrequirementsandchallengesforAMCs.

CBIRCIssuedtheNoticeonLaunchingtheSecondBatchofNPLTransferPilotProject

Onthe30thofDecember2022,CBIRCissuedtheNoticetoexpandtheNPLtransferorscopeofthepilotproject.Undertheexpandedpilot,continuingonthesamebasisastheinitialpilot,ChinaDevelopmentBank,ChinaExport-ImportBank,AgriculturalDevelopmentBankofChina,aswellastrustcompanies,consumerfinancecompanies,autofinancecompaniesandfinancialleasingcompaniesareallincludedintheproject;Besidestheaforementionedentities,citycommercialbanksandsmallandmedium-sizedruralbankinginstitutionsregisteredinBeijing,Hebei,InnerMongolia,Liaoning,Heilongjiang,Shanghai,Jiangsu,Zhejiang,Henan,GuangdongandGansuwerealsoincludedinthescope.

Comments:Thisexpansionincludespolicybanksandnon-bankfinancialinstitutionsinthescopeofthepilotprogram,enhancingthediversityofNPLsources.Withthediversedegreeofassetriskclassesacrossthetransferorswithinthepilotproject,thedegreeofassetqualitydifferentiationmaybeenhanced,andthetransferpricewillbefurtherstratified,whichfurtherenrichestheassetdiversityinthemarket.

ANumberofAMCsHaveBeenApprovedtoConnecttoCreditReferenceCenterSystemofPBoC

ZheshangAMC,ChinaMerchantsPingAnAMCandseveralotherlicensedAMCshavebeengrantedapprovaltoconnecttotheCreditReferenceCenterSystemofPBoC,whichwillallowthemtoaccessthepersonalcreditprofiles.

Comments:AsthecompetitionintheNPLindustryintensifies,AMCshavebeguntoseeksupply-sidesourcesofexpansionaroundthe"largerscopeofNPLs",andthepersonalNPLbusinesshasbecomethechoiceofmany

AMCs.ConnectiontothecreditreferencesystemofPBoCisanecessarystepforAMCstocarryoutpersonalNPLbusiness.

Note[1]CBIRCwasabolishedinMarch2023aspartofaplantooverhaulgovernmentagencies,beingreplacedbytheNationalAdministrationofFinancialRegulation(NAFR).

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AccesstoFinancialAMCs[1]FurtherEased

Onthe17thofNovember2023,NFRAreleasestheImplementationMeasuresfortheAdministrativeLicensingofNon-bankFinancialInstitutions.ThenewMeasure,whichwilltakeeffectonNovember10th,allowsoverseasnon-financialinstitutionstoinvestinfinancialAMCs,andabolishesthetotalassetsrequirementforoverseasfinancialinstitutionstobeinvestorsoffinancialAMCs.

Overseasnon-financialinstitutions,asinvestorstoafinancialAMC,musthavemorethan10yearsofexperienceinoperatingandmanagingnon-performingassetinvestmentandmanagement.Inaddition,itmustbeingoodfinancialstandingandhavemadeconsecutiveprofitsinthelast2fiscalyears;ifitisthecontrollingshareholderofthefinancialAMC,itmusthavemadeconsecutiveprofitsinthelast3fiscalyears.Thebalanceofequityinvestmentshallinprinciplenotexceed50%ofthenetassetsoftheenterprise(includingtheamountofthecurrentinvestment);asacontrollingshareholderofafinancialassetmanagementcompany,thebalanceofequityinvestmentshallinprinciplenotexceed40%ofthenetassetsoftheenterprise(includingtheamountofthecurrentinvestment).Thefundsforequityparticipationmustbeownfunds,andnonon-ownfundssuchasentrustedfundsordebtfundsisallowedforequityparticipation.

Comments:Comparedwiththepreviousversion,thebiggestchangeinthenewMeasuresisthatoverseasnon-bankingfinancialinstitutionsareallowedtoinvestinfinancialAMCs,whichisarelaxationofthepreviousrestrictionthatoverseasinvestmentinstitutionsmustbefinancialinstitutions.Inaddition,therequirementsforthetotalassetsizeofforeigninvestmentinstitutionshavebeencancelled,butaddingtherequirementsfornetassetratio,operatingandmanagementexperienceofnon-performingassetinstitutions,andcontinuousprofitability.Generallyspeaking,theoverallrequirementsforforeigninstitutionstoinvestinfinancialAMCshavebeenrelaxed,andmorespecificrequirementshavebeenputforwardforinvestmentinstitutionsintermsoftheirprofessionalisminthefieldofnon-performingassetsandfinancialstatus.

ChinaBondYindengNon-PerformingAssetExchangeCenter(Beijing)Co(CBY-NPLEx)FormallyCompletedtheChangeofCompanyNamefromHuarongZhongguancunDistressedAssetExchangeCo

Accordingtothecompany'swebsite,CBY-NPLExisastate-ownedenterpriseundertheChinaCentralDepository&ClearingCo.,Ltd.andheldbytheBankingCreditAssetsRegistrationandCirculationCenterCo.,Ltd.witharegisteredcapitalofRMB500million.CBY-NPLExisaspecializedassetexchangevenueapprovedbytheGovernment,withbusinessscopeoftradingofnon-performingassets(includingdebt,equity,physicalobjects,etc.)andotherkindsofdebtassetstrading,enterprise

managementconsulting,investmentandfinancinginformationintermediaryandbrokerageconsulting.

On13thofDecember2021,ChinaHuarongAMCcompletedthetransferofa79.6%stakeinHuarongZhongguancunDistressedAssetExchangeCotoYindengCenter,withatransferpriceofRMB323million.

Comments:SincethereleaseoftheCircularoftheGeneralOfficeofCBIRConthePilotWorkofNPLTransferin2021andthepilotprogrammeofpersonalNPLtransfer,YindengCenterhasbecomeoneofthemainstreamNPLtradingplatforms.AccordingtothedataoftheYindengCenter,thecurrentNPLtransactionvolumeintheYindengCenteraccountforarelativelyhighproportionofpersonalNPLportfoliotrade.WiththeestablishmentoftheCBY-NPLEx,theconstructionofYindengCenter'sNPLtradingplatformhasbeenfurtherpromoted,anditisexpectedthatthetradingscale,assettypesandcounterpartieswillbefurtherexpanded.

TheStateCommissionOfficeofPublicSectorsReform(SCOPSR)HasOfficiallyReleasedProvisionsontheFunctions,StructureandStaffingofNAFR

TheProvisionsoutliningtheNAFR’sfunctions,structure,andstaffing,comeon10thofNovember2023,twoweeksafterthetwice-a-decadeCentralFinancialWorkConferenceinBeijing.

ItproposesthatthefunctionsoftakingtheleadincrackingdownonillegalfinancialactivitieswithinNAFRinclude"Toformulatearegulatorysystemforlocalfinancialorganizationssuchasmicrofinancecompanies,financialguaranteecompanies,pawnbrokers,financialleasingcompanies,commercialfactoringcompanies,provincial

AMCs,etc.,andtoguideandsupervisetherelevantoperationalworkoflocalfinancialsupervisoryauthorities".

Comments:Inthepast,thesupervisionofprovincialAMCswastheresponsibilityoftheDepartmentofInclusiveFinanceintheCBIRC,andnowitistheresponsibilityoftheBureauofCombatingIllegalFinancialActivitiesofNAFR,andthesupervisionofprovincialAMCshasbeenexplicitlyincludedintheregulatoryframeworkofNAFR.Previously,thereisnounifiedregulatorysystemforprovincialAMCs,andsomeprovinceshaveintroducedtheirownregulatoryapproach.Recently,theInterimMeasuresfortheSupervisionandAdministrationofProvincialAssetManagementCompanieshavebeenreleasedtotheindustryforcomments,anditisexpectedthattheregulatoryapproachforprovincialAMCswillbeintroducedsoon,andthedegreeofindustrystandardizationwillrisefurther.

CHINANPL–MARKETREPORT

Note[1]TheFinancialAssetManagementCompaniesrefertothenationalBigFiveAMCs,i.e.,CindaAMC,CITICFinancialAMC(formerlyknownas

HuarongAMC),GreatWallAMC,OrientAMC,andGalaxyAMC.Itisaddedthat,onJanuary25,2024,ChinaHuarongAssetManagementCo.,Ltd.changeditsnametoChinaCITICFinancialAssetManagementCo.,Ltd.,andothercontentsofthebusinesslicenseremainedunchanged.

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REPORT

Exhibit1-1NPLBalanceinChinaCommercialBanks

Balance(RMBtrillion)

3.5

3.0

2.5

2.0

1.5

1.0

NPLBalanceNPLRatio%

'18'19'20'21'22'23

2.0%

1.9%

1.8%

1.7%

1.6%

1.5%

CHINANPL–MARKET

Source:NationalAdministrationofFinancialRegulation

Asoftheendof2023,theNPLbalanceofChina’scommercialbankswasRMB3.23trillion(US$448billion),anincreaseofRMB243billionyear-on-year.Meanwhile,theNPLratioofChinacommercialbankswas1.59%,adecreaseof4bpscomparedtotheendof2022.

In2023,theoverallassetqualityofthebankingindustryremainedstable,andmajorfinancialinstitutionscontinuedtheirpreviouseffortstodisposeofnon-performingassets,andactivelyadoptedavarietyofmeanstopreventandresolvefinancialrisks.Overall,in2023,China'scommercialbankscontinuedtomaintainthetrendofrisingNPLbalances,decreasingNPLratio,andgraduallyslowingdownthepaceofcompression.Thecurrenteconomiclandscapeiscomplexandvolatile,andsomepotentialNPLsmaybetemporarilycoveredordelayedexposure,increasingthedifficultyofriskpreventionandcontrolinthebankingsector.

Note:FXrateof1USD:7.2RMB

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Exhibit1-2ProvincialNPLBalances(RMBbillion)andRatiosbytheendof2023

CHINANPL–MARKETREPORT

235.7

174.0165.4

134.9125.2

116.6110.8106.3

99.8

94.886.2

t

75.979.074.5

71.1

66.959.8

58.858.252.7

Guangdong(1) Hebei(2) Jiangsu(3) Zhejiang(4) Shandong(5) Sichuan(6) Beijing(7) Shanghai(8) Gansu(9) Fujian(10) Hunan(11) Anhui(12) Jiangxi(13) Guangxi(14) Guizhou(15)Chongqing(16) Henan(17)Heilongjiang(18) Tianjin(19)Shanxi(20)

44.4

36.819.0

TotalNPLRatio(%)inBankingIndustry|2023

>3%

2%-3%

1%-2%

<1%

Notdisclosed

Jilin(21)Xinjiang(22)Hainan(23)

Source:NationalAdministrationofFinancialRegulation

Note:DataforGansuProvinceareforthethirdquarterof2023;NoavailabledataformprovincesofInnerMongolia,Liaoning,Hubei,Yunnan,Tibet,Shaanxi,Qinghai,andNingxia

BasedonthelatestreporteddataineachprovincialbranchoftheNAFR,theNPLbalancesandratiosaredisplayedasabove(dataofsomeprovincesisnotdisclosed).ItisevidentthatintheprovincesofGansu,Hainan,Heilongjiang,Jilin,andHebei,theNPLratioisatanextremelyhighlevel.TheNPLratioinotherprovincesarerelativelymanageable,especiallyintheprovincesthatforeigninvestorshaveshownthemostinterestin,includingJiangsuprovince(0.70%),Zhejiangprovince(0.62%),Guangdongprovince(1.35%),andFujianprovince(1.15%).

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Chapter2:OverviewofRecentNPLTransactions

“ThenumberofNPLtransactionswasatahighlevelin2023andisexpectedtoincreasein2024duetotheincreasingsupplyvolume.Withthesituationsofbankingsectorgrapplingwitharealestatecrisis,localgovernmentdebtwoesandrisingindividualdelinquenciesasChina'spost-Covidrecoveryfades,underGovernment’srequirementsofacceleratingthedisposalofNPLstofendoffsystemicfinancialrisks,theNPLmarketwillstillbepromisinginthecomingyears.

Startingfrom2024,weaddmarkettradeinformationforpersonalNPLsasyoucanseein

CHINANPL–MARKETREPORT

11.Overall,thePersonalNPLMarketisincreasinglyattractinginvestors’attentionafterthepilotprogramexpandedwithfarmoreplayersoffinancialinstitutions”

Exhibit2-1NPLBid&TransactionTrend

30-dayAvarage(RMBBillion)

16.014.012.010.08.06.04.02.0

--

——NPLbidvolume——NPLtransactionvolume

Note:datainchartisgenerateddailybycalculatingthelatest30-daymovingaverageofthevolumeofbidortransactioncasesSource:PublicInformation,ZheshangAssetResearchInstitute

TheNPLbidvolumefluctuateddownwardsthroughout2023,withmarketactivationweakeningandoverallsizelevelslowerthanthroughout2022.NPLtransactionvolumewaslessvolatileandremainedatahighlevelingeneral.Theoveralltransactionvolumewashigherthanlastyear,resultingintheshrinkinggapbetweentransactionandbidvolume,indicatingstrengthenedmarketliquiditycomparedtolastyear.

Basedonhistorictrends–similartrendsforbidandtransactionvolume,withthelatterlaggingbehindby3to6months,transactionvolumeisexpectedtocontinuetheincreasein2024,andtheNPLbidvolume,inotherwords,marketsupplywillincreaseaswellastheyearendlevelin2023ishigherthanthatin2022.

BreakdownofNPLTransactionVolumebyMarket

Generally,onlylicensedAMCs(nationalAMCsandprovincialAMCs)areallowedtopurchaseNPLsona“bulk”basisfromChinesebanks(3ormoreNPLsperthecurrentdefinitionof“bulk”transfer).TheacquisitionofNPLportfoliosdirectlyfromChinesebanksorotherChinesefinancialinstitutionsisreferredtoasaPrimaryMarketTransaction.

TheacquisitionofNPLportfoliosfromlicensedAMCsbyinvestors(bothdomesticandforeign)andthesubsequenttransferofNPLportfoliosamonginvestorsarereferredtoasSecondaryMarketTransactions.

Thisreportenclosesprimarymarkettransactionsandpartofsecondarymarkettransactions,whichonlyincludestransactiondatafromthetradesmadebylicensedAMCstoinvestors.Itdoesnotincludeanytransactionsbetweentwoprivateinvestors.

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CHINANPL–MARKETREPORT

Proportionin2023

16%

23%

18%

40%

Exhibit2-2NPLTransactionVolume–SellerBreakdowninthePrimaryMarket

(RMBBillion)

100

90

80

70

60

50

40

30

20

10

--

94

61

51

49

44

4039383940

35

26

29262828

10

2018191819

1415

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-22

Oct-22

Nov-22

Dec-22

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

Sep-23

Oct-23

Nov-23

Dec-23

CityCommercialBanksBig5Banks

Joint-stockBanksPolicyBanks

RuralCommercialBanksOtherBanks

Source:PublicInformation,ZheshangAssetResearchInstitute

In2023,thetotalsizeofNPLtransactionsfrombankswasapproximatelyRMB400.7billion,ayear-on-yearincreaseof

0.5%.Thisbreakdownwasprimarilydrivenbythelargeassetvolumeoftraditionalbigbanks(Big5banksandlargejoint-

stockbanks)thatresultsinadominantmarketposition.

Proportionin2023

18%

23%

10%

9%

16%

21%

Exhibit2-3NPLTransactionVolume–BuyerBreakdowninthePrimaryMarket

(RMBBillion)

100

80

60

40

20

--

94

61

51

49

403938443940

2935262828

14201819181915

26

10

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-22

Oct-22

Nov-22

Dec-22

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

Sep-23

Oct-23

Nov-23

Dec-23

GreatWallOrientCITICCindaGalaxyProvincialLicensedAMCsOthers*

Note*:"Others"herereferstoinstitutionswithoutAMClicense,mainlyprivateenterprises,foreigninstitutions,andindividualinvestors.Source:PublicInformation,ZheshangAssetResearchInstitute.

AmongthebuyersinChina’sprimaryNPLmarket,theBigFiveAMCs(CITIC,Cinda,Orient,GreatWall,Galaxy)purchasedapproximatelyRMB233.6billion,provinciallicensedAMCspurchasedapproximatelyRMB93.0billion,andotherinvestorspurchasedapproximatelyRMB74.0billion.AsidefromtheBigFiveAMCs,thepurchasesizesofotherinstitutionsalldecreasedcomparedtolastyear.ThepurchasesizeofCindaAMCrosethemost,up139.1%year-on-year.

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CHINANPL–MARKETREPORT

Proportionin2023

17%

37%

8%

16%

22%

Exhibit2-4NPLTransactionVolume–SellerBreakdownintheSecondaryMarket

(RMBBillion)

60

50

40

30

20

10

--

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-22

Oct-22

Nov-22

Dec-22

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

Sep-23

Oct-23

Nov-23

Dec-23

57

4444

37

42

353436

414041

33

29

27

31

26

3028

22

1916

16

22

11

GreatWallOrientCITICCindaGalaxyProvincialLicensedAMCs

Source:PublicInformation,ZheshangAssetResearchInstitute

TotalNPLsalesfromlicensedAMCsin2023haveincreasedby0.4%year-on-yeartoRMB379.7billion,andamongtheBigFiveAMCs,CindaAMChadthelargestproportionofNPLtransactions,whileGalaxyAMChadthesmallestproportion(approximately0.6%).Regardlessofthebidscaleortransactionscale,theBig5AMCs(morespecifically,thepreviousBig4AMCs)stillmaintaintheirpositionasthedominantsellersinthesecondarymarket.

Proportionin2023

18%

80%

Exhibit2-5NPLTransactionVolume–BuyerBreakdownintheSecondaryMarket

(RMBBillion)

60

50

40

30

20

10

--

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-22

Oct-22

Nov-22

Dec-22

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

Sep-23

Oct-23

Nov-23

Dec-23

57

44

37

42

41

40

44

41

35

36

29

27

33

30

26

34

3028

22

16

19

16

22

11

uBig5AMCsuProvincialLicensedAMCsuOtherInvestors

Source:PublicInformation,ZheshangAssetResearchInstitute

RegardingNPLssoldbylicensedAMCsinthesecondarymarket,approximatelyRMB303.7billionwerepurchasedbyinvestorsotherthanlicensedAMCsorintheproportionof80%,whichdecreasedby2.5%year-on-yearintheamountanddecreasedby2.2%intheproportion,andRMB68.8billionwerepurchasedbyprovinciallicensedAMCs,whiletheBigFiveAMCs(morespecifically,thepreviousBig4AMCs)purchasedRMB6.2billion.

Thesecondarymarketremainsaprimarilynon-licensed-AMCinvestorsmarket,wherethelackofpolicyandgovernmentguidanceinthesecondarymarketcreatesamorecompetitiveandprice-sensitivemarketdynamic.

Page|9

NPLBid&TransactionVolumeDistribution

NPLbiddingvolumeswereheavilyconcentratedinasmallnumberofprovinces,withthetopfiveaccountingfor48%oftotalNPLbidsin2023andseeingproportionreduceof2%comparingto2022’s.

CHINANPL–MARKETREPORT

OfTotal%

5

BiddingVolume

(RMBbn)

RankProvince

4

t

2

3

1

Guangdong

339.3

16.01%

2

Jiangsu

215.9

10.19%

3

Henan

165.1

7.79%

4

Shandong

162.3

7.66%

5

Liaoning

127.8

6.03%

1

Note:Excepttop5provinces,gradationofgreyinmapindicatesbidvolumerange,thedeepercolour,thehighervolume,sameforbelow.

Source:PublicInformation,ZheshangAssetResearchInstitute

t

3

5

4

1

Likewise,NPLtransactionvolumeswerealsoheavilyconcentratedin2023,andtogether,thetop5provinceswiththelargestNPLtransactionsizeaccountedforappropriately54%ofthevolumeoftotalChineseNPLtransactionsbutseeing6%decreasefrom2022.Thecompositionofthetop5provincesremainedunchangedwithonlythedifferentorderscomparedto2022,exceptLiaoningandZhejiangprovinces,whichstatesthatfinancialinstitutionsinLiaoningprovincewereveryeagertodisposeofNPLsandthattheNPLmarketinZhejiangprovincewasinextremelyhighliquidity.

Rank

Province

TransactionVolume

(RMBbn)

OfTotal%

1

Zhejiang

150.6

14.79%

2

Guangdong

137.4

13.49%

3

Shandong

121.2

11.90%

4

Jiangsu

79.6

7.82%

5

Henan

63.2

6.21%

Source:PublicInformation,ZheshangAssetResearchInstitute

2

ConsideringthescaleofNPLbidsandtransactions,theNPLmarketactivitiesintheYangtzeRiverDelta(JiangsuProvince,ZhejiangProvince)andthePearlRiverDelta(GuangdongProvince)arestillrobustandstableastheNPLmarketismoreactiveandpopularinthesetwodevelopedregions,andintheShandongprovince,Henanprovince,andLiaoningprovince,theNPLbidand/ortransactionvolumeisalsoquitelarge,likelyduetolocalpolicyrequirementsonbanksandlicensedAMCstodisposeofNPLsofacertainsize.

Page|10

PersonalNPLMarket

In2023,atotalof390personalNPLportfoliosweresoldinthemarket,withthebusinessscale(claimOPBandGLB)totallingRMB96.53billion,farexceedingthatof2022bothintermsofquantityandamount,andshowinganoverallupwardtrend,withhugemarketpotential.

AsExhibit2-6showsbelow,ineachofthelastthreequartersof2023,transactionvolumesweresignificantlylargerthanthatinthefirstquarter,partiallybecause,inthefirstquarterof2023,thenewlyaddedpilotinstitutionswerestillinthestageofopeningaccountsinYinDengCenterorpackagingpersonalNPLportfoliosforsale.

CHINANPL–MARKETREPORT

AsfarasthesourceofpersonalNPLportfolioswasconcerned,joint-stockbanksweretheabsolutemainforce,withPingAnBanklistingpersonalNPLportfoliosinYinDengCenterin2023farexceedingotherbanksbothintermsofnumberandamount.AcquirersweredominatedbyprovincialAMCs.In2023,ZheshangAMCacquiredasuper-sizedpersonalNPLportfoliofromHomeCreditConsumerFinanceCompanywithanoutstandingprincipalbalance(OPB)ofRMB15.76billionandagrossloanbalance(GLB)ofRMB16.98billion,andotherprovincialAMCssuchasLiaoningFuAnFinancialAMC,GuangzhouAMC,GuohouAMC,andNingxiaFinancialAMCwerealsoactivelylayingoutpersonalNPLmarket.TheBigFiveAMCswerealsograduallygettinginvolved,buttheywereenteringthemarketmoreintheformoffundersthroughcooperationwithpersonalNPLdisposalcompanies.

Exhibit2-6OverviewofPersonalNPLPortfoliosTransactedinYinDengCenter

50.0045.0040.0035.0030.0025.0020.0015.0010.005.00

-

182

200

180

160

140

120

100

80

60

40

20

-

5.4

6.4

5.2

9.0

47.5

34.9

89

92

41

27

25

22

13

7

10

2021Q32021Q42022Q12022Q22022Q32022Q42023Q12023Q22023Q32023Q4

TotalTransaction