The Chinese government is reportedly contemplating the merger of three of the country’s largest bad debt managers into sovereign wealth fund China Investment Corporation (CIC).
The initiative is part of a strategy to reform financial institutions in China, reported Reuters, citing Xinhua Finance News. However, the news report was subsequently removed by the Chinese state-run media outlet.
As per the report, the three asset management companies that will be incorporated into CIC include China Cinda Asset Management, China Orient Asset Management, and China Great Wall Asset Management.
The Chinese Ministry of Finance is the largest shareholder in all the three asset management companies.
Reuters reported that the new proposal aligns with the government’s pledge to delineate its functions as both regulator and shareholder of state-owned financial institutions.
The asset management companies, along with an additional entity, were founded in 1999 to assist in managing the bad loans of the four largest state banks, which were under the threat of insolvency.
China Huarong, now known as China CITIC Financial Asset Management, is the fourth asset management company that was formed by China. It has been exempted from the merger.
Established in 2007, CIC was incorporated in compliance with China’s Company Law, with a registered capital of $200bn.
CIC is a vehicle to diversify the country’s foreign exchange holdings and seek maximum returns for its shareholder while managing risk within acceptable bounds.
Besides, the sovereign wealth fund has been tasked to make overseas investments and equity investments in Chinese financial institutions via its three subsidiaries, CIC International, CIC Capital, and Central Huijin Investment.
