The fundamental reason for the emergence of non-performing assets of banks lies in the ownership arrangement of state-owned enterprises and state-owned banks under the national financing system. The financing system with the state as the sole intermediary has led to the emergence of non-performing assets of banks. For a long period of time, state-owned enterprises mainly obtained the required funds through wholly state-owned banks. The implementation of the "appropriation to loan" led to a general lack of self owned funds in state-owned enterprises. Enterprises operating with high debts dragged down the quality of bank loans. Loans issued by state-owned banks according to the state's instructions also produced a large number of non-performing assets. The operation problems of state-owned enterprises further increased the burden on state-owned banks.