Plans are being considered for China’s central bank to support Huarong with a balance sheet cleanup amid concerns about the state of the giant bad debt manager.
Beijing is considering to have the People’s Bank of China take on assets from some of Huarong’s unprofitable operations, according to a «Bloomberg» report citing unnamed sources, valued at more than 100 billion yuan ($15 billion).
The plan has not been finalized and could still see changes.
Offshore Huarong
Separately, China Huarong International Holding Ltd. – the offshore arm that issues or guarantees most of the bad debt manager’s dollar bonds – is in the process of transferring distressed assets to a separate offshore entity in order to improve the financial health of the group's main overseas funding entity.
Distressed assets valued at tens of billions of yuan will be shifted into a separate entity called China Huarong Overseas Investment Co., the report said.
State Rescue
Market watchers are closely monitoring the developments at Huarong as a means of gauging Beijing's willingness to back troubled state-owned enterprises.
The bad debt manager, which is majority-owned by China’s finance ministry, first fell into the spotlight after a delayed release of its annual results sparked fears about its financial health and a selloff in Asian credit markets.
Although Huarong remained silent, Chinese regulators came out to provide assurances about its operations, claiming that liquidity at the firm was ample.
