 On
July 19, 2000, President of the People's Bank of China Dai Xianglong
revealed to Chinese and foreign journalists that by the end of June
2000, four major Chinese state-owned commercial banks have had their
1,300 billion yuan bad loans "taken over" by asset management companies.
It happened just one year after the appearance of Xinda, Great Wall,
Oriental and Huarong, the State Council's subsidiary companies.
The displacement of 1,300 billion yuan of bad loans means that the
scheduled bad asset stripping has come to an end. How to dispose of
them next is a highly sensitive financial issue.
To complete stripping in "struggle for legal support"
To complete stripping in "struggle for legal support"
"Although you know it is a pile of junk, you have to buy, and have
to buy at the book price." said a department manager of an asset management
company.
The purchase and disposal of bad assets is an asset management company's
responsibility, but the problem is that several loan elements for
the bad loans stripped by the banks are missing. A participant in
the stripping gave an example: an account book shows there is a building
somewhere, but the building is found on site to be incomplete. President
of Huarong Asset Management Company Yang Kaisheng confirmed that in
the bad assets acquired by his company, dead loans occupied a large
proportion.
Dr.Niu Nanjie from Oriental Asset Management Company recalled the
pressure they encountered: "That debtor-creditor relationships must
be clear is a basic requirement of Oriental. For example, it must
be clear who is the debtor, whose money does the debtor own, and what
evidence is available. Even so, there are still some accounts found
unqualified, and we have to reject them."
Huarong, however, insists on another policy - the key to decision
if bad assets can be accepted rests on whether the disposal right
for the bad assets is effective or not. They insist on inspecting
every individual enterprise on site, if possible.
Although the criteria have descended so low, quite a lot of bad assets
that the banks attempt to strip are rejected by asset management companies.
As a result, the acceptance process becomes process where a struggle
for legal support takes place between the asset management companies
and the banks.
Unqualified yet accepted bad loans still represent a large proportion.
It is said that this part of the assets occupies over 20% in the Great
Wall company along. Many problems are not exposed until after the
acceptance. Therefore, some of the banks' remaining problems are inherited
by the asset management companies as well.
For the 1,300 billion yuan "problem assets", what the asset management
companies should do next is to sort out and classify them. That means
classifying the assets according to the elements, like the debtor's
profession, field, scale and asset quality. This can be regarded as
an opportunity to re-verify these assets' qualities.
To change debt into stock: mission or path
"We are searching while doing the job." President of the Huarong Asset
Management Company Yang Kaisheng is reluctant to see his company merely
as a "debt claimant". At the approach of the assets disposal, "searching"
gets to be more important than anything else.
 At
the initial stage of the asset management company, a prevalent misunderstanding
made the term "change debt into stock" a substitute for its mission.
As a matter of fact, there are many ways to dispose of the assets;
the shift from debt to stock is just one of them.
According to the plan designer's idea, the meaning of "change debt
into stock" is to change the four major banks' claim right for the
state-owned enterprises' bad debts, into the asset management companies'
interest, then the asset management companies retreat by means of
repurchase, listing and transfer, and help the assets liquidate ultimately.
According to Caijing magazine, of the total 1,300 billion yuan, more
than 400 billion yuan of assets are recommended by the State Economic
and Trade Commission for liquidation through "changing debt into stock".
The assets handled by Huarong are a small part of the total amount,
about one quarter, and the assets received by the other three are
one third respectively.
The State Economic and Trade Commission is responsible for preparing
a "name list" of the assets to be handled through "changing debt into
stock", and reviewing the working schedule together with the Ministry
of Finance and the People's Bank of China. Of course, the asset management
companies do not have to accept all of them, and they need to talk
with each one of them. If the negotiations fail, they can refuse to
sign. Anyway, this is unlikely to happen.
Sceptics think that in "changing debt into stock" there is concealed
a profitable temptation for enterprises: free from the loan interest.
Therefore, if the measure can result in "two wins" for both banks
and enterprises, and how to gain the "two wins", have being argued
since the very beginning.
Xinda Asset Management Company was founded first, and underwent more
"ordeals" as well. Soon after "changing debt into stock" commenced,
Shandong Huayu Gypsum Group triggered a bout of displeasure between
Xinda and the State Economic and Trade Commission. Although the company
was excluded from the name list when more than 600 companies were
chosen by the State Economic and Trade Commission, Xinda still put
it into the first round of "changing debt into stock", and Shandong
Golden Group Company also stated clearly that they would purchase
Yuhua stock over a certain period of time. Xinda's self-decisive action
annoyed the State Economic and Trade Commission. The two sides even
took their dispute to the State Council, making it the fiercest conflict
between an asset management company and the state administration so
far. The Yuhua Group was finally forced to stop "changing debt into
stock".
In addition, regarding the withdrawal of asset management companies
from "changing debt into stock", there still exist different opinions
on both the practice and the theory. To be in line with the policy,
and out of concern for the withdrawal channel, asset management companies,
in addition to maintaining the right to let "changing debt into stock"
enterprises be listed or transferred, also signed repurchase agreements
with them. According to the agreements, within a stated period after
the completion of "changing debt into stock", enterprises must finish
their repurchase of the total stock held by the asset management companies.
Otherwise, asset management companies will have the right to sell
or auction their stocks.
A controversial problem is if enterprises are able to repurchase,
then isn't it from debt to stock, and from stock to debt again? If
enterprises are not able to repurchase, then the real result is debt
extension. Expert with the World Bank Zhang Chunlin thinks almost
none of the enterprises can repurchase, and that the agreements reflect
the asset management companies' "laziness", and are not helpful for
assets disposal. |
