On March 7, 2017, the CPPCC National Committee members, co-president of YRIC, former president of China Merchants Bank Ma Weihua released proposals on the improvement of incentive mechanism for banks to address the burden of nonperforming loans. Mr. Ma believes it is essential to timely revise and improve the policies to help commercial banks increasing the intensity and reducing the cost of disposal, and by doing that the risk of the entire financial system can be lowered.

Figure: Co-president of YRIC Ma Weihua

Co-president of YRIC Ma Weihua said that upgrading disposal of non-performing assets should mainly adopt measures like writing off, transferring, restructuring and independent settlement, etc., of which the write-off and transfer are the most important means. However, by using write-off or transfer disposal, the commercial banks will face a greater loss, the provision charge can be used to offset this part.

Figure: Co-president of YRIC Ma Weihua

Mr. Ma hold that, if the tax deduction policy could not be revised and improved opportunely to encourage banks taking more intensive means to address the burden of nonperforming loans, the enthusiasm of commercial banks could be harmed, and it will do no good to defuse commercial loan risks. Thus, by improving the tax deduction policies, banks will be more willing to deal with the disposal of non-performing assets and the systemic risk in the financial system can be decreased.

Based on all of that, co-president of YRIC Ma Weihua suggested that the department of taxation and finance should adjust the loss of small and medium enterprises to write off the pre-tax deduction policy. 

Figure: Co-president of YRIC Ma Weihua

At the same time, Ma Weihua also suggested that it is important to figure out the loss deduction policies that explain how to offset the loss from the transformation of non - performing loan creditor 's rights and interests. Transforming non-performing assets creditor's rights has become an important means for commercial banks to resolve non-performing assets. However, due to the uncertainty of current tax policy, it is impossible to declare tax deduction based on the fact that the creditor's rights itself does not realize the transformation. In view of this, the department of taxation should revise and improve relevant policies in accordance with the financial product innovation and change, and thereby the proceeds of the transfer of claims can be declared in accordance with the transfer of tax deduction.