New ‘bad-debt bank’ set up in Chongqing
Print Edition
A new “bad-debt bank” has been created from an existing state-owned assets management firm in Chongqing to tackle bad debts and other questionable assets from local companies.
Chongqing Yukang Assets Management Co will inherit the assets and debt restructuring arm of the state-owned Chongqing Yufu Assets Management Group Co, the company said.
The new company has a registered capital of 5 billion yuan (US$749 million) and has signed deals with 21 banks to secure a credit line of 160 billion yuan.
Yukang is the latest bad-debt bank to be created by China’s local governments in the past two years as the central government asks them to shoulder more responsibility in addressing rising bad debts stemming from debt-fueled economic expansion amid a global financial crisis.
After the spin-off, Yufu will become a state-owned equity investment company, while Yukang will dispose of bad debts and other assets from distressed companies and zombie firms and participate in restructuring of state-owned enterprises in the city.
The central government has made deleveraging one of the priorities for its supply-side structural reform package, which aims to shift growth patterns away from inefficient investment. Such investment has led to overcapacity in sectors in which companies are finding it difficult to generate enough revenue to pay back bank loans.
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