China investigates top bad debt official over corruption

China is investigating an executive of one of the largest state-backed troubled debt managers over graft, six months after the execution of a former top bank official on corruption charges.

Hu Xiaogang, vice president of the Great Wall Asset Management Corporation, is under investigation by the Central Commission for Discipline Inspection, the country’s anti-corruption watchdog, over suspected “grave” violations, according to a statement released by the China Banking and Insurance Organization. commission.

The investigation is the latest indication of possible financial misconduct in the upper echelons of “bad debt” asset managers in China, where concerns are growing about their high debt levels and declining profits.

The groups, which include Huarong Asset Management and China Cinda Asset Management, were under Intensify audit by regulators and investors as Beijing struggles with risky elements in the country’s financial system, which it believes threaten economic stability.

The CBIRC statement cited Hu’s former role as vice president of China Orient Asset Management, another major investor in distressed debt, indicating that the charges relate to his nearly two decades of tenure at that group rather than his role at Great Wall.

Four major bad debt management firms were established in China in the wake of the Asian financial crisis in the late 1990s. They are designed to reduce risk in the country’s largest state-owned lenders by removing bad debts from their books before they are listed on the stock market.

But the groups have become Serious problem for Beijing Having amassed more than $100 billion in debt, it has aggressively expanded into sectors beyond its remittances and spread into financial conglomerates.

While Huarong and Cinda are listed in Hong Kong, Great Wall and Orient have remained private. According to Standard & Poor’s data, the four expanded their overseas assets significantly from 2015-2017.

Huarong City, the largest investor in distressed debt in China, owes about $22 billion in dollar-denominated debt and faces severe market pressure Because of the delay in publishing its annual results. Shares of the Hong Kong-listed company were suspended in April while its bond prices were volatile.

Lai Xiaomin, the 58-year-old former president of Hurongور was executed In January, he was found guilty of taking $280 million in bribes and other crimes.

The crackdown is a sign of Chinese President Xi Jinping’s resilience in the years-long anti-corruption drive. Experts outside China have seen the campaign as a way to target graft to the government and deeply entrenched businesses while threatening potential rivals to Xi’s power from within the Communist Party.

Debt problems at state-backed non-performing loan managers have also emerged against a backdrop of growing international investor concern about a Standard number of assumptions and a sharp increase in Low ratings hit the Chinese financial sector. More than $100 billion of debt borrowed by Chinese companies is due this year.

In response, China The Ministry of Finance is studying Last month, Bloomberg News, citing unnamed sources, reported the transfer of state shares in the four largest bad debt groups to a new holding company as a way to further mitigate the risks of the financial system.

Great Wall perpetual bonds fell slightly on Wednesday to trade at 97.8 cents on the dollar.

Additional reporting by Sherry Fei Guo in Beijing

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