Legal Considerations On Non Performing Loans Structuring

During the tremendous growth of the Chinese economy in the last decade, corporates in China were able to obtain loans from banks and other financial institutions that were equally keen to advance credit, leading to a rapid rise in debt levels. Whilst the government sought to curb corporate debt by, among other means, restricting informal borrowing (also known as 'shadow banking'), the slowdown in the economy in the last year or so and more recently the outbreak of the coronavirus have yet again led to renewed policies to allow more loans and local government bond issuance. China's debt to GDP ratio remains high, and so is the level of non-performing loans.

A non-performing loan (NPL) is a loan where the borrower is unable to service the debt, either through the non-payment of principal or interest payment, or both.  Different classifications of loans in default exist, often depending on the estimated percentage of loss of principal and interest after taking into