Premier Zhu Rongji has backed plans to encourage foreign investment in state-owned banks' non-performing loans through asset managers. At a high-level conference in Beijing earlier this week, the Chinese leadership identified the area as a new priority in foreign capital utilisation, according to Xinhua. The Xinhua report confirmed that new rules were to be hammered out for foreign investment in bad-loan disposal. Earlier this week, officials at China Huarong Asset Management and China Cinda Asset Management said draft guidelines on foreign investment in non-performing loans had been submitted to the State Council for approval at the end of last month. The rules could be announced as early as next month, said Wang Wenjie, general manager of Huarong's international department. The guidelines would give official blessing to Sino-foreign joint venture asset manager for the first time. They would also allow foreign investors to acquire Chinese companies' debts, tangible assets used as loan collateral and shares created through debt-to-equity swaps. A China Daily report yesterday described the guidelines as temporary rules. Huarong and Cinda are among four state-owned asset managers set up by Beijing in 1999, one for each of the four big state-owned commercial banks - Industrial & Commercial Bank of China, Bank of China, Agricultural Bank of China and China Construction Bank. The four banks have recorded massive non-performing loans levels over the years due to irrational lending practices mainly to shore up state-owned enterprises. The four asset managers have removed bad loans with a combined book value of about 1.39 trillion yuan (HK$1.3 trillion) from banks' books. Officials hope foreign investors will not only speed the disposal of such loans, but also boost the rate of recovery. Meanwhile, the Central Propaganda Bureau has issued a document clearly stating Beijing's policy to allow private sector investment in the mass media without interference with editorial policy, according to yesterday's Ming Pao newspaper. The policy is in part to prepare China for entry to the World Trade Organisation. Media magnate Rupert Murdoch is reportedly in talks to acquire a stake in a key Chinese newspaper.