Jitters surface over delay in bad-loan sale
Worries over the pace of a key plan to aid China's troubled banks surfaced yesterday with the Government yet to approve the landmark sale of non-performing loans to foreign investors seven months after the deal's announcement.
In November, Huarong Asset Management announced that it would sell US$1.3 billion in non-performing assets to a consortium led by United States investment bank Morgan Stanley.
Morgan Stanley executive director George Bednar said the Government had yet to sign off on the deal. 'That has yet to close. We're still waiting for some elements of government approval.'
Sources close to the deal played down the delay, citing bureaucratic snags and complicated approvals from several government bodies to set up the joint venture to service the loans.
Analysts say China needs to move faster to resolve 1.4 trillion yuan (about HK$1.32 trillion) in bad loans, which asset management companies (AMCs) have taken off the books of major state banks.
The consortium's planned venture will act as a collection agency, contacting borrowers, recovering outstanding loans, restructuring debtor companies and even pushing for bankruptcies.
Sources said that the role was previously reserved for AMCs, so authorities had yet to grant approval.
'[It] is complex, ground breaking and new to Chinese regulatory agencies that have to approve it. Whatever it does, it is going to become a model for the rest of the industry, and I think they want to get it right,' said one source involved in the deal.
China set up the AMCs in 1999 to resolve bad loans of its four leading banks: Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China.
After three years, some Chinese and foreign analysts are calling for a faster 'big bang' approach to the problem.
'Why don't they get this show on the road? You would think, once they're willing to sell at big discounts, what's the hold up?' said Nicholas Lardy, a senior fellow at the Washington-based Brookings Institution and a specialist on China's financial system.
