In an effort to manage the growth of non-perfuming mainland loans, Beijing has approved a new bad debt manager – the first in more than two decades.
Beijing-based China Galaxy Asset Management has been approved by the China Banking and Insurance Regulatory Commission as a national asset management company (AMC), according to a statement, with capitalization of 10 billion yuan ($1.5 billion).
More than 20 years ago, Beijing established four AMCs to handle bad debt management in the country’s ‘big four’ state-owned banks: Huarong for ICBC; Great Wall for the Agricultural Bank of China; Orient for Bank of China; and Cinda for CCB.
Bad Debt on the Rise
The new AMC could provide much need relief for smaller Chinese lenders which are not only facing increasing default risks – annual missed payments are expected to reach an all-time record-high of 104 billion yuan ($15.9 billion) this year according to Bloomberg data – but have also been asked by Beijing officials to «sacrifice profits» support the fallout from the pandemic which resulted in the sector’s first profit drop since the global financial crisis.
According to data from the regulator, outstanding non-performing loans at Chinese commercial banks reached 2.8 trillion yuan ($430 billion) at the end of the third quarter, the highest since at least March 2009.
