Four Heavily Indebted CCP Asset Management Firms Can’t Bail Out The Property Market

According to media reports on 29th, China Huarong (华融), China Cinda (信达), China Great Wall Asset, and China Orient, Communist China’s four major asset management companies, are now facing a credit crisis as a result of the deepening of dire situations in the real estate industry. These four companies provided tons of loans to most of the top 50 property developers during the real estate boom over the past few years.

It is reported that the balance sheets of these four companies are showing an increasing amount of bad debts. Among them, the size of the debt in the category of acquisition and restructuring in Cinda and Huarong alone has exceeded RMB 200 billion (about $28.9 billion), accounting for nearly 50% of the total. They are unable to bail out the nation’s ailing real estate sector before they can get their finances in order. Some reports say the dire situation has forced the Chinese Communist Party (CCP)’s regulators to reconsider debt restructuring plans for related sectors.

One of the most profitable investments is providing indirect loans to estate companies, according to sources familiar with the matter. Property developers buy back a 10% to 12% price premium and then hand them over to asset management companies to take over the loans and bonds. This is a practice that always works in an industry’s upward cycle. However, these asset management companies are paying the price for their speculative investment practices amid CCP’s regime tightened policy on property company debt and strict anti-epidemic measures.