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China Huarong says cooling economy poses challenges to bad debt business
December 17, 2015 / 2:31 PM / 2 years ago

China Huarong says cooling economy poses challenges to bad debt business

BEIJING, Dec 17 (Reuters) - China Huarong Asset Management Co, the country’s biggest distressed debt manager by assets, said the country’s cooling economy presents both opportunity and challenge as it seeks to grow its business.

Huarong, which makes its revenue primarily through the purchase, management and disposal of distressed debt from financial institutions, raised HK$17.8 billion ($2.3 billion) in a Hong Kong initial public offering (IPO) in October. .

The company plans to use 60 percent of its IPO proceeds to develop its distressed asset business, said Huarong Chairman Lai Xiaomin at a press conference in Beijing late on Thursday.

Forecasting China’s economy to grow between 6.7 percent and 7 percent in 2016, Lai said Huarong’s distressed debt business will “definitely” expand.

Soured and overdue loans are piling up at a faster rate at Chinese banks. As of the end of September, China’s commercial banks posted an average non-performing loan (NPL) ratio of 1.59 percent, the highest since the 2009 global financial crisis.

For Huarong, that represents a double-edged sword.

“Making money next year will be more difficult,” Lai said.

“The risks will become more evident, especially in terms of company default ratio,” Lai said.

Huarong and its main competitor China Cinda Asset Management Co have teamed up with e-commerce giant Alibaba Group Holding Ltd to capitalize on the expanding market.

On Tuesday, Huarong launched its biggest sale since 2010, offering $8 billion in bad loans through Taobao, a popular online platform operated by Alibaba.

Huarong’s first-half profit attributed to shareholders reached 8.37 billion yuan in 2015, up 47 percent from the same period a year earlier, according to its IPO filing. Its total assets has reached nearly 800 billion yuan, according to a press release on Thursday. ($1 = 7.7511 Hong Kong dollars) (Reporting By Shu Zhang and Matthew Miller; Editing by Elaine Hardcastle)

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