China is investigating an executive in one of its largest debt managers afflicted by the state for grafting it, six months after a former bank banking official was executed on corruption charges.
Hu Xiaogang, vice president of China Great Wall Asset Management, is being investigated by the Central Commission for Discipline Inspection, the country’s anti-corruption watchdog, for suspected “serious” violations, according to a statement released by China Banking and Insurance Regulatory Commission.
The probe is the latest indication of possible bad financial condition in the top ranks of China’s “bad debt” asset management companies, as concerns grow over their high debt levels and decrease in profits.
The groups, which include Huarong Asset Management and China Cinda Asset Management, have been under investigation intensifying scrutiny by regulators and investors while Beijing faces risky elements in the country’s financial system, which it believes threatens economic stability.
The CBIRC statement referred to Hu’s previous role as vice president of China Orient Asset Management, another major distressed debt investor, implying that the allegations relate to his nearly two-decade stay in that group rather than the their role in the Great Wall.
China’s four major bad debt managers were established after the Asian financial crisis in the late 1990s They were designed to reduce risk in the country’s largest state-owned credit institutions by eliminating credit. defective from his books ahead of the stock market listing.
But groups have become one serious problem for Beijing having raised more than $ 100 billion in debt, aggressively expanding into sectors beyond its mandates and operating into financial conglomerates.
While Huarong and Cinda are listed in Hong Kong, the Great Wall and the East remain private. According to S&P data, all four have significantly expanded their overseas equity by 2015-17.
Huarong, China’s largest distressed debt investor, owes about $ 22 billion in debt denominated in dollars and faces intense market pressure on delays in publishing their annual results. Shares of the Hong Kong company were suspended in April while bond prices remained volatile.
Lai Xiaomin, 58-year-old former head of Huarong has been executed of January after he was found guilty of taking bribes worth $ 280 million and other crimes.
The crackdown is a sign of resistance by Chinese President Xi Jinping’s anti-corruption years. The campaign has been seen by experts outside China as a means of targeting both deeply entrenched government and corporate grafts while threatening potential challenges to Xi’s power from the communist party.
Debt problems in state-backed distressed loan managers have also emerged in a context of growing concern for international investors for a record number of defects is a strong growth of downgrades classifications hitting China’s financial sector. More than $ 100bn in dollar debt borrowed from Chinese companies is due this year.
In response, to China the finance minister is under consideration The transfer of state shares in the top four bad debt groups to a new holding company as a means to further de-risk the financial system, Bloomberg News reported last month, citing anonymous sources.
The Great Wall’s perpetual bond prices fell slightly Wednesday to trade at 97.8 cents on the dollar.
More information from Sherry Fei Ju in Beijing