This paper will examine the four Chinese asset management companies (ASC). First, the general overview of the ASC in China will be provided, including their roles, financing, funding etc. Then, in the following subchapters, the focus will be put on presenting more specific information about each of the for AMCs.
Table of Contents
1 Introduction
2 Description of Asset Management Companies in China
2.1 General overview
2.2 China Great Wall Asset Management Corporation (CGWAMC)
2.3 China Orient Asset Management Corporation (COAMC)
2.4 Cinda Asset Management Corporation (CAMC)
2.5 Huarong Asset Management Corporation (HAMC)
Research Objectives and Key Topics
This paper examines the role, structure, and operational functions of the four major state-owned asset management companies (AMCs) established in China in 1999 to address the systemic issue of non-performing loans (NPLs) within the national banking sector.
- The historical context and necessity of creating specialized AMCs in China.
- The operational mandate and legal framework governing the four major AMCs.
- The financing strategies, including the role of the People's Bank of China and debt-for-equity swaps.
- Comparative analysis of the individual strategies employed by Great Wall, Orient, Cinda, and Huarong.
- The impact of AMCs on the restructuring and risk mitigation of China’s commercial banks.
Excerpt from the Book
2.1 General overview
China's four major financial assets management companies (AMC) were set up in 1999 to manage, purchase and dispose non-performing loans (NPLs) of the “big four” state-owned commercial Chinese banks. The four AMC, with the corresponding banks, are:
China Great Wall Asset Management Co. – Agriculture Bank of China (ABC)
China Orient Asset Management Co. – Bank of China (BOC)
China Cinda Asset Management Co. – China Construction Bank (CCB)
China Huarong Asset Management Co. – Industrial and Commercial Bank of China (ICBC)
All four companies are wholly state-owned financial management companies and were established with the approval of the State Council of the People’s Republic of China. The registered (initial) capital of each of the four AMC was RMB 10 billion, fully funded by the Ministry of Finance (China Great Wall Asset Management Corporation, 2011; China Great Wall Asset Management Corporation, 2011; Hickman & Chen, 1999 & China Huarong Asset Management Corporation, 2007).
The idea of setting up the AMCs was to remove NLPs from the state banks, or in other words cleaning up the balance sheets of the banks. The large volume of bad loans in China was the result of decades of government lending to unprofitable and poor performing state enterprises, property speculation in the early 1990s, and a lax internal risk control system. That was a part of a medium-term bank restructuring plan (Fung, George, Hohl, & Ma, 2004). The four companies, which got a combined 1.4 trillion yuan (US$184 billion) of non-performing loans at inception, were required to finish the disposal by the end of 2006 (China Daily, 2007).
Summary of Chapters
1 Introduction: This chapter provides the historical background of asset management companies and introduces securitization as a mechanism to address non-performing loans.
2 Description of Asset Management Companies in China: This chapter details the establishment, characteristics, and individual operational strategies of the four major Chinese AMCs.
2.1 General overview: This section explains the origins of the four AMCs in 1999, their initial capitalization, and their primary mandate to clean up the balance sheets of the big four state-owned banks.
2.2 China Great Wall Asset Management Corporation (CGWAMC): This section outlines the specific focus of CGWAMC on minimizing financial risks through methods such as debt collection and asset securitization.
2.3 China Orient Asset Management Corporation (COAMC): This section highlights the role of COAMC in managing NPLs and its development of asset-backed securities like "Dongyuan No. 1".
2.4 Cinda Asset Management Corporation (CAMC): This section describes Cinda's primary responsibility for handling loans from the China Construction Bank using various recovery methods.
2.5 Huarong Asset Management Corporation (HAMC): This section outlines the broad business scope of Huarong, including IPO recommendations and extensive equity holdings in various enterprises.
Keywords
Asset Management Companies, China, Non-Performing Loans, NPLs, Securitization, Financial Restructuring, Banking Sector, State-Owned Enterprises, Debt-for-Equity Swaps, Huarong, Cinda, Great Wall, Orient, Ministry of Finance, PBOC.
Frequently Asked Questions
What is the primary focus of this research?
The research explores the structural and operational landscape of the four major Chinese Asset Management Companies formed in 1999 to resolve the non-performing loan crisis in state-owned banks.
What are the central themes of the work?
Key themes include the government's securitization strategy, the restructuring of the banking sector, funding models for bad asset disposal, and the individual profiles of China’s four main AMCs.
What is the primary objective of the study?
The primary goal is to explain how China utilized specialized state-owned companies to manage and dispose of non-performing loans to improve the financial health of the national banking system.
Which scientific methodology is applied?
The work utilizes a descriptive analysis based on financial reports, legal notifications, and academic literature to detail the role and characteristics of the AMCs.
What is addressed in the main part of the document?
The main section evaluates the background of the AMCs, compares their legal foundations and mandates, and provides specific details regarding the operations of Great Wall, Orient, Cinda, and Huarong.
Which keywords define this paper?
The paper is characterized by terms such as Asset Management Companies, NPLs, Financial Restructuring, China, Securitization, and state-owned commercial banks.
How were the AMCs initially funded?
They were funded by an initial capital of RMB 10 billion from the Ministry of Finance, supplemented by significant financing from the People's Bank of China, largely through debt and credit swaps.
What is the significance of the "sunset date" for these companies?
They were originally mandated to operate for 10 years to dispose of bad loans, but the paper notes that the reality differed, and they remained operational beyond the anticipated 2009 timeline.
What distinguishes COAMC from the other AMCs?
COAMC holds the largest asset size among the four and was the first to issue asset-backed securities in China with the "Dongyuan No. 1" issuance.
- Quote paper
- Tomasz Wilczak (Author), 2011, Asset Management Companies in China, Munich, GRIN Verlag, https://www.grin.com/document/180220
