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China Invites Overseas Investors in Asset Management
China is accelerating the process of handling non-performing loans (NPLs) by bringing in foreign investors, who will also take the opportunity to enter the Chinese market.
Yang Kaisheng, president of the China Huarong Asset Management Corporation, said in a interview with Xinhua Friday that overseas investors could purchase Huarong's debts and other assets through various means.
"Apart from sectors crucial to the national security and economy of China, Huarong's assets in the form of claimable assets, equities and material objects, such as apartment buildings, equipment and factories, are all available for sales," said Yang.
Foreign investors can directly invest in enterprises by purchasing equities held by Huarong or become the creditor of enterprises, according to him.
China's State Administration of Foreign Exchange and Ministry of Foreign Trade and Economic Cooperation are drafting regulations to facilitate the smooth transaction, he added.
Earlier this week, Huarong, the largest asset management company in China, appointed Ernest & Young (E&Y) as its sole advisor. The US financial-services company will help Huarong select a 3-billion-US dollar package in NPLs and other assets for overseas sales. Although the package is about five percent of Huarong's total portfolio, the pact set in motion an unprecedented mission to open the world's second largest market after Japan for bad loans to foreigners, insiders commented.
"Investors will certainly hope for a low price and we'll be trying for a relatively high price, as we shoulder the responsibility of maximizing state assets," said Yang.
"However, I think the final adjustment will be made by the market," Yang added.
"At the current stage, the biggest problem in cooperating with foreigners stems from their misunderstanding of Huarong's assets," Yang pointed out.
To most foreigners, Huarong's assets are "bad loans" that can hardly be retrieved, Yang said. "But I would rather label them as 'improperly disposed assets' than bad loans."
The huge potential of the assets has not been fully discovered and need shrewd investor's participation, he added.
To remove the misunderstanding, Huarong has planned a road show in Europe and North America in the next few months to show off its portfolio directly to foreigners.
Huarong aims to retrieve about 30 cents on one dollar from asset sales, according to Yang's conservative estimation.
Currently, China's four state financial asset management companies have purchased a total non-performing loans (NPLs) of 1. 3 trillion yuan from state-owned commercial banks, and Huarong's assets lead all the other three to hit 407.7 billion yuan, with more than 70,000 debtors.
By the year 2000, Huarong had wiped out 7.86 billion yuan of assets, and retrieved capital totaling 3.28 billion yuan, including two billion yuan in cash.
Yang said that Huarong aims to dispose of 150 billion yuan in NPLs in three years and will strive to handle all its NPLs by the year 2006.
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