BEIJING, July 22 (Xinhua) -- China's two financial asset management (AM) giants China Huarong Asset Management Co., Ltd. and China Great Wall Asset Management Co., Ltd. acquired in total more than 110 billion yuan of non-performing assets (NPAs) in the first half of this year.
By the end of June, balances of China's banking sector NPAs stood at 3.6 trillion yuan, representing a NPA ratio of 2.1 percent, up 0.08 percentage point from the beginning of this year. Under such circumstances, AM companies (AMCs) cranked up efforts to deal with NPAs in the country.
Analysts believe NPA treatment sector is embracing development opportunities but the growth in NPA does not necessarily mean absence of problems in view of different opinions of buyers and sellers on pricing and increasing treatment difficulties.
As Xinhua Finance, a financial news platform run by Xinhua News Agency reported, China Huarong Asset Management Co., Ltd. took over more than 80 billion yuan of NPAs in the first six months and in June in particular, the company purchased over 50 billion yuan of NPA packages from banks nationwide.
For China Great Wall Asset Management Co., Ltd., it acquired more than 30 billion yuan of NPAs in the first half of 2020.
According to an industry expert, AMCs can utilize their profession to reduce NPAs of small- and medium-sized enterprises via acquiring NPAs, debt restructuring, debt financing, equity investment and support them to go through the present difficulty.
As Xinhua Finance citing a spokesman of China Banking and Insurance Regulatory Commission (CBIRC) reported, book value of balances of non-performing loans did not rise obviously since the start of this year but non-performing loan risks might appear and pick up in the following period given the postponed default risk exposure because of the lagging effect of economic downturn over financial sector and effects of countering macroeconomic policies.
However, the growth in NPAs did not mean easy money for AMCs. A recent report on China's financial NPA market investigation in 2020 released by China Orient Asset Management Co., Ltd. showed that generally, prices of NPA packages on the primary market still stayed in a downward trend and for those acquired in 2019, their prices fell about 10 percent.
The report highlighted that currently, the most important factors to consider in acquiring NPAs are risk control and the following treatment means as the overall market sentiment has changed.
Previously in 2017, NPAs market remained extremely hot and market share was the main determinant of AMCs' NPA package acquisition decisions.
However, AMCs did not take market share as a key factor for their decision making from last year and focus now more on risk control in an effort to prevent turning their acquired NPAs into NPAs again when asset prices fall, the report said. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
A single purchase
