Bad debt manager China Cinda to help top regulator tackle peer-to-peer lending risks

Company confirms China Banking and Insurance Regulatory Commission met big four bad debt managers over platform collapses

PUBLISHED : Thursday, 30 August, 2018, 5:35pm
UPDATED : Thursday, 30 August, 2018, 11:06pm

China Cinda Asset Management, one of the country’s four biggest state-owned bad debt managers, said on Thursday it would “proactively” help the government tackle peer-to-peer (P2P) lending risks, after confirming China’s top financial regulator had recently met the big four asset management companies on the issue following several protests in the past few weeks by investors who had lost money on collapsed P2P platforms.

P2P risks are a social issue of great concern in China
Chen Yanqing, assistant to president, China Cinda Asset Management

“P2P risks are a social issue of great concern in China. As a professional company managing bad debt, we will proactively take part in tackling relevant risks and help the government address the issue,” Chen Yanqing, assistant to the company’s president, told the media on Thursday.

“We will leverage our professional advantages and offer services in dealing with bad debt, such as acting as custodians of P2P assets,” he said.

Chen said the company had already set up a special team and was conducting an in-depth investigation into the issue. “We are right now in the process of communicating with regulators and some local governments,” he said.

Cinda itself has had no involvement with P2P projects. Nor has it acquired any P2P platforms, added Chen.

The company also announced its interim result late on Wednesday, posting a 3 per cent year-on-year decrease in net profit to 8.62 billion yuan (US$1.26 billion) for the first six months of the year. Its revenue dropped by 9.6 per cent to 54.8 billion yuan.

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The big four asset management companies were established by the Chinese central government in 1999 to tackle bad loans in the banking system, with the firms leveraging funds from the Ministry of Finance and loans from the People’s Bank of China to buy bad debt from commercial lenders. The companies have since diversified their businesses, expanding into the acquisition and restructuring of distressed assets at non-financial institutions.

Chen confirmed on Thursday that the China Banking and Insurance Regulatory Commission had called a meeting of these companies – China Huarong, Great Wall, China Cinda and China Orient – to discuss ways of defusing P2P risks and protecting financial stability. “The regulators wanted to draw on our past experience about addressing bad debt risks,” he said.

Several hundred P2P lending platforms have collapsed in the past few months, sparking several protests by investors who have lost their money and are demanding the government bailout them out, including demonstrations near the offices of the commission in Beijing.

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According to statistics by lending data provider, in July alone 218 P2P lending platforms either failed, or ran into withdrawal difficulties.

By the end of last month, the total number of failed P2P lenders had touched 4,740, with an outstanding loan balance of about 78 billion yuan, and having affected 1.1 million investors.

Chen said he expected the supply of distressed assets to increase as the government tightened regulations and cut excess capacity in some sectors amid supply-side structural reforms.

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Zhang Ziai, Cinda’s chairman, said the company would use “investment banking thinking” in disposing of distressed assets, such as through restructuring and liquidation, and would carry out more debt-to-equity swaps to deal with bad debt.

He said he expected the company’s debt-to-equity swap amount to increase in the second half of 2018.