Opinion | Cinda's sweetener fails to hide toxins of sugar-coated poison
'Monopoly' status allows asset manager to borrow money from banks and pour it into dubious entities – cash-strapped private enterprises
Bad-debt management is a business not easy to understand. After spending two days trying to make sense of the 3.5cm-thick prospectus of China Cinda Asset Management Company, your columnist had to seek help from two bankers.
"Don't waste your time on the numbers. What really matters is the policy," seemed to be the gist of their response.
From the numbers, Cinda looks promising. Its profit increased from 2.1 billion yuan (HK$2.65 billion) in 2011 to 8.4 billion yuan in 2012 and stood at 3.5 billion yuan as of end of June.
Yet, bad-debt management and pricing in China, where professional liquidators do not exist, is never transparent. It can be the result of bad-loan managers trading assets among themselves at artificially inflated values; or local governments "repaying" bad loans with more failing businesses.
The sharp rise in Cinda's account receivables to income ratio from 16.25 per cent to 47.7 per cent between 2010 and June 2013 offers little comfort.
So what is Beijing's policy on Cinda? Its pre-IPO restructuring managed by the Ministry of Finance is quite telling.