THE country’s foreign exchange regulator has started to allow non-banking institutions in Shenzhen to sell soured assets to global investors, two sources with direct knowledge of the matter said Friday.

The recent change means China’s asset management companies (AMCs), which buy nonperforming loans (NPLs) from stressed financial institutions at a discount, can also sell bad debts overseas, the sources said.

Previously, only banks were allowed to sell bad loans to overseas institutions under a program that was launched in Shenzhen in mid-2017.

The Shenzhen branch of the State Administration of Foreign Exchange (SAFE) has also simplified applications for such sales and cross-border funding transactions, one of the sources said.

The moves are part of broader efforts by China to reduce risks in its massive financial system, where the volume of commercial bank NPLs has hit a 13-year high of 1.77 trillion yuan (US$277.12 billion).

China is in the second year of a nationwide crackdown to reduce risks in the financial system. A “regulatory windstorm” has been unleashed by the authorities on shadow banking, regulatory arbitrage and hidden bad debt.

Chinese commercial banks’ nonperforming loan ratio steadied at 1.74 percent at the end of December, unchanged from the end of the third quarter, the banking regulator said.

(SD-Agencies)