China Sells Nonperforming Loans Worth 1.8 Billion Yuan

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Last updated at: (Beijing Time) Friday, December 28, 2001

China Sells Nonperforming Loans Worth 1.8 Billion Yuan

According to COAMC, a group of foreign investors, mainly with U.S.-based investment funds, have bought a set of non-performing loans worth 217 million U.S. dollars from China.

The non-performing loans consisted of money borrowed by 55 businesses located in south China's Guangdong Province. The businesses include land agents, manufacturers and trade companies

A group of foreign investors, mainly with U.S.-based investment funds, have bought a set of non-performing loans worth 217 million U.S. dollars from China, said the China Oriental Asset Management Corporation (COAMC) Thursday.

The non-performing loans consisted of money borrowed by 55 businesses located in south China's Guangdong Province. The businesses include land agents, manufacturers and trade companies, the source said.

The foreign investors paid 21 million U.S. dollars in cash, equal to 10 percent of the loans' total value, to COAMC, the source added.

In the next three years, the COAMC will collect loans for the foreign buyers and charge fees for agency services, according to their agreement.

The company regards this as a favorable start for the handling of the domestic banks' large number of non-performing loans, according to the source.

The COAMC was founded in 1999 as one of the four assets management companies wholly-owned by the state. The company was set up to handle non-performing assets bought from the Bank of China, one of the four state-owned commercial banks.

Four Major AMCs in China

In 1999, the Chinese government decided to set up four assets management corporations (AMCs), namely Cinda, Huarong, the Great Wall, and Orient to collectively deal with non-performing assets purchased from commercial banks.

In the past two years, the four AMCs bought 1393.9 billion Yuan NPLs from the four state-owned commercial banks and the State Development Bank, resulting in an obvious improvement of asset quality for the banks with an average 9.7% reduction of NPLs. After debt-equity swap program, liability-asset ratio of the 580 enterprises, whose NPLs reached 405 billion Yuan, fell from 70% to 50%.

With the methods including restructuring, auction, lawsuit, clearance, sub-contract, bankruptcy, sales, IPO, and introduction of strategic investors, the four AMCs have actively carried out NPL disposal program.

They strengthened internal management to prevent moral risks, and set up an effective mechanism for operation and supervision. By the end of September of 2001, the four AMCs have made great contributions to the elimination of financial risks, and the reform of state-owned enterprises, as well as commercial banks, by disposing 93.08 billion Yuan NPLs, recovering 37.77 billion Yuan, including 23.28 billion Yuan in cash.

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