Abstract
The balance of non-performing loans (NPLs) of Chinese banking financial institutions rebounded for the first time after 2005, and credit risk has emerged as one of the rapidly rising risks in today’s financial markets. In this study, we focus on the NPLs of financial institutions. In particular, the factors affecting their rate are studied. A dynamic control theory model is used to set up a Hamilton function for describing the effect of these factors. Moreover, the path of NPLs under the influence of various factors is obtained. It was found that improved risk control and macroeconomy factors reduced the number of NPLs. In particular, to reduce the number of NPLs, the capacity of banks to manage loans should be strengthened.
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