Shanghai's Pudong New Area is a hub for financial institutions, especially the Lujiazui Financial and Trade Zone. Therefore, the Pudong New Area Court has naturally become one of the courts handling the most financial disputes. Steel trade-related financial cases have been the most numerous cases accepted by the Pudong New Area Court since last year. "We have devoted almost all our efforts to steel trade cases; the volume is too large," a relevant person from the Pudong Court told the China Securities Journal reporter.

 

　　In 2013 alone, the Sixth Civil Division of the Pudong New Area Court accepted more than 1,100 steel trade-related financial cases. After research and analysis, the court believes that banks will file at least another 1,000 cases. "The surge in steel trade-related financial cases has brought tremendous pressure and difficulties to our court's financial trial work," said the relevant person from the Pudong Court.

 

　　A bank headquartered in Shanghai also revealed at its performance briefing that in the steel trade sector alone, the bank's non-performing loans increased by 5.8 billion yuan last year, mainly concentrated in its Suzhou and Wuxi branches.

 

　　What is puzzling is that, unlike most loan disputes, banks, as "creditors," have a rather ambiguous attitude towards "deadbeats" who default on debts.

 

　　The Sixth Civil Division of the Pudong New Area Court reported that banks' litigation work in steel trade-related financial cases urgently needs standardization. First, banks' litigation materials are incomplete, and the defendant's identity information is insufficiently prepared, resulting in the court being unable to serve court notices to all addresses at once; second, banks use litigation as a means, and after filing suits, they request postponement of hearings on the grounds that both parties are negotiating. Or, after the court's summons cannot be served for the first time, they refuse to provide other effective contact information for the defendant and do not agree to service by public announcement, delaying time. Moreover, multiple banks repeatedly sue the same insolvent steel trading company. For subject matter that is disputed or has already been sealed multiple times, banks that file lawsuits still request property preservation, increasing the difficulty of the court's review.

 

　　Due to the characteristics of steel trade-related financial cases, such as many defendants, many preservations, many public announcements, many service addresses, many large-amount cases, and many judgments, the Sixth Civil Division of the Pudong New Area Court, despite all-out efforts, still faces tremendous pressure in closing cases.

 

　　A senior figure in the non-performing asset disposal industry introduced that, under normal circumstances, only loans that still cannot be recovered through litigation will ultimately be classified by banks as "loss loans." "From banks stripping non-performing assets to finally being auctioned by asset management companies and transferred to us, it takes about two years," the person said.

 

　　At present, the "flood peak" of this wave of bank non-performing assets may not have arrived yet. Data released by the China Banking Regulatory Commission in February this year showed that in the fourth quarter of 2013, commercial banks' non-performing loans rose from 492.8 billion yuan in the same period of the previous year to 592.1 billion yuan, a year-on-year increase of 20%. A Moody's research report stated that the growth rate of non-performing loans in the fourth quarter of 2013 was significantly higher than the growth rate of total loans. According to data disclosed by the China Banking Regulatory Commission, the total amount of bank non-performing loans is currently about 45% higher than the level in the third quarter of 2011, when non-performing loans were at a five-year low. As of the third quarter of 2013, the growth rate of non-performing loans significantly exceeded the growth rate of total loans. Due to China's slowing economic growth and tightening domestic credit market, some domestic borrowers with weaker financial strength will face greater refinancing risks in 2014, which may further lead to deterioration in loan performance.