China deploys bad-loans expert to clean up Henan’s funding woes

Ahead of China’s twice-a-decade leadership conclave, Beijing deployed a bad-loans expert to clean up Henan’s festering banking and property mess.

Iris Ouyang, writing in TheStar said that Henan’s local authorities assigned a bad-loans manager and a state-owned real estate developer to clean up the province’s property mess,

A working team set up by Henan Asset Management Company and Zhengzhou Real Estate Group will help cash-starved developers work out their funding woes, according to a report posted on the asset management firm’s website.

The team will also aim to revive stalled projects, sell assets and restructure businesses to ensure the completion and smooth delivery of homes to contracted buyers, the report added.

Henan AMC is 40-per cent owned by Henan Investment Corporation, the provincial investment platform in central China. Its involvement underscores how local authorities are responding to Premier Li Keqiang’s instructions to fix the simmering banking and property crisis that is spreading throughout the country, reported TheStar.

Henan AMC’s involvement mirrors the assignment of bad-debt managers at the national level to help China’s largest banks work out the non-performing loans in the property sector.

Great Wall AMC is already cleaning up bad debt on the books of the Agricultural Bank of China, while China Orient AMC is working with Bank of China.

Henan’s provincial capital Zhengzhou is ground zero in the mess, where a banking scam by local fraudsters has combined with a mortgage boycott by disgruntled homebuyers.

The scam has run up a tally of 40 billion yuan (USD 6 billion) in missing bank deposits and a rare protest by nearly 1,000 depositors.

Henan, the home province of China Evergrande Group’s founder Xu Jiayin, also had more unfinished residential projects than anywhere else in China, according to mainland Chinese media, said Iris.

More provinces have stepped up. Gortune Investment in southern China’s economic powerhouse Guangdong province signed an agreement in April with the bond defaulter Fantasia Holdings Group and its Colour Life Services Group unit to restructure their debt. Gortune is an investment led by the Guangdong provincial government, said Iris.

“More local [AMCs] may follow suit” in the footsteps of Henan AMC in helping tackle the crisis, said Zhu Yiming, the director of corporate research at China Real Estate Information Corporation, an industry consultant.

“The pressure is huge on Henan to ensure the delivery of the houses, so the collaboration shows the determination of local authorities to solve the problem,” added Zhu.

The bad debt managers had issued bonds to finance the mergers and acquisitions of distressed property projects, together with China Merchants Bank, Industrial Bank, Shanghai Pudong Development Bank, Bank of Communications, China Guangfa Bank and Ping An Bank.

Still, the AMCs face an uphill challenge in cleaning up China’s property mess. Of the mass revolt by mortgage borrowers to pay their loans – affecting more than 280 projects in 86 Chinese cities – over grievances from shoddy quality to non-completion, mostly in Henan province, reported TheStar.

Great Wall AMC has failed for the second time to announce its 2021 financial results, while concerns about the collective exposure of Chinese banks to the mortgage revolt have led to a sell-off in banks’ shares. (ANI)