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China: Government AMCs to become new conglomerates

Lack of transparency concerns potential partners; Cinda leads the group in JV creation

The four asset management companies set up by the Chinese government to house bad bank assets are poised to outlive their original purpose and become financial conglomerates, according to a report by Shanghai-based research company Z-Ben Advisors.

The four AMCs – Cinda, Huarong, Orient and GreatWall – were set up following the banking recession of 1999 to dispose of the non-performing loans that had accumulated on the books of China’s four largest banks. From 2000 onwards the AMCs have also been expanding their business lines by rehabilitating the distressed financial institutions they have inherited.

Now Z-Ben says indications from the finance ministry and market chatter about initial public offerings of the AMCs suggest they are being encouraged to become profitable in their own right. Foreign companies are interested in the potential for business tie-ups that the AMCs offer, the report says, but are nervous because of the lack of publicly available information on their performance.

Failure or great potential?

"Some commentators who have been following the AMCs since they were created are saying: ‘These things have failed at what they were meant to do’," says Min Tha Graw, associate director at Z-Ben Advisors.

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