Head of China’s biggest bad-debt manager Huarong under investigation for graft

Trade in shares of China Huarong Asset Management, the country’s largest bad loan manager, was suspended on Wednesday morning in Hong Kong, after China’s anticorruption watchdog put its chairman, Lai Xiaomin, under investigation.

Set up in 1999 to handle distressed assets, Huarong is one of China’s big four “bad” banks, which between 1999 and 2005 soaked up non-performing loans worth 1.4 trillion yuan (US$222.63 billion) from state-owned banks.

Lai, 55, was placed under investigation for suspected “serious discipline violations”, an euphemism for graft, according to the website of China’s Central Commission for Discipline Inspection, making him the latest in a string of high-profile financial executives to be targeted by authorities.

It was unclear what charges he faces, but according to Chinese media outlet Caixin, Lai had been channelling funds worth dozens of billion yuan to a Ningxia-based private company for years. The 21st Century Business Herald reported that there was an internal report by Huarong staff about Lai’s wrongdoings.

The spread of Huarong’s 2027 US dollar bonds rose by 2.5 basis points on Wednesday to 228 basis points at 9.29am in Hong Kong, its widest spread since it was issued in October last year, prices compiled from Bloomberg show.