There has been increasing interests to purchase Chinese non-performing assets by foreign investors, as a Chinese financial asset exchange platform saw increasing transaction volumes this year, mostly driven by NPL deals.
Shenzhen Qianhai Financial Assets Exchange, a financial asset exchange platform under Ping An Insurance（Group）Company of China, has seen its cross-border transaction volume increase, with NPL deals accounting for around 70% of all cross-border transactions, deputy general manager Zhan Yuhong told Chinese media outlet The Economic Observer.
Transaction volume of cross-border NPL assets in the exchange reached RMB7 billion (USD1 billion), and has been increasingly rapidly in the past year. Zhan said the increasing deals in NPL purchases was due to supportive policies to encourage foreign investment in the sector.
Shenzhen Qianhai Financial Asset Exchange, established in 2011, is a platform to facilitate issuance, registration, pricing, custodian, certification, transactions and clearance of financial products including bonds, private debt, asset-backed securities and wealth management products.
General manager Zhang said as the Chinese government moves to cut overcapacity and reduce inventory, some companies with high leverage or overcapacity are experiencing liquidity difficulties. Many banks, which in the past few years were slow to recognize non-performing loans, are now aggressively cleaning up such bad debt. Both drivers are pushing up supply of NPLs.
A 2017 report by China Orient Asset Management projected that Chinese commercial banks’ NPL balances and bad loan ratios will both gradually increase in the next three to five years.
To allow foreign investors to invest in China’s NPL market, the Shenzhen branch of China’s State Administration of Foreign Exchange (SAFE) was the first in the country to initiate a pilot cross-border NPL transfer program in 2015.
In June, Guangdong Bureau of State Administration of Foreign Exchange set up a second pilot cross-border transfers of NPL program to allow banks, financial institutions and individuals to transfer NPLs through Guangdong Finance Assets Exchange Center.
Foreign Investors Accelerate Chinese NPL Purchases As Cross-Border Deals Increases appeared first on China Money Network.