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China Is About to Get Serious With Bad Debt


bloomberg articleThe following is an excerpt from Lianting Tu | September 4, 2016 | Bloomberg.com |

China’s banks, which dialed down fundraising efforts this year even as bad debts swelled, are making up for lost time.

Both lenders and the companies set up to acquire their delinquent assets are bolstering their finances. China Citic Bank Corp. last month announced plans to raise as much as 40 billion yuan ($6 billion), while Agricultural Bank of China Ltd., Industrial Bank Co. and China Zheshang Bank Co. are also boosting capital. China Cinda Asset Management Co. and China Huarong Asset Management Co. are poised to tap investors.

"Chinese banks are preemptively raising capital while pricing remains favorable in order to tackle higher loan impairments,” said Nicholas Yap, a credit analyst at Mitsubishi UFJ Securities HK Ltd. in Hong Kong. A rule change in April that requires lenders to make full provisions for shadow lending recorded in their receivables books is also encouraging the fundraising, he said.

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