The financial conglomerate China Huarong, one of China’s most indebted groups whose bankruptcy would have significant economic repercussions, has announced a recapitalization agreement with investors.
China Huarong Asset Management is one of the largest bad debt managers in China. As part of the Chinese government’s 1999 financial reforms, it was one of four companies created to improve the country’s banking system. Since then, the group has diversified into investment, lending, and real estate.
Approximately 10,000 people work at China Huarong, whose main shareholder is the Chinese Ministry of Finance.
Due to heavy debt, the company has not yet released its accounts for 2020. For this reason, the Hong Kong Stock Exchange has suspended Huarong’s listings since April.
In a statement, the group said that it had reached an agreement with investors for a bailout. CITIC Group, a Chinese public investment fund, is one of them.
Analyst Kamil Amin with UBS bank says this is a “clearly good signal” that Beijing is prioritizing deleveraging.
According to Bloomberg, “support for state-owned enterprises remains strong during times of financial instability.”.
Despite this, no details were released for this agreement, which is still subject to regulatory approval.
During 2020, Chinese company Huarong suffered economic losses of 102.9 billion yuan, resulting from the Covid-19 pandemic.
Former CEO’s capital sentence
China’s justice system sentenced to death former Huarong CEO Lai Xiaomin for corruption and polygamy in January and executed him shortly after. This is an unusual sentence in China for a senior financial sector official.
Lai Xiaomin was accused of accepting more than $280 million in bribes and embezzling $3.6 million of public funds.
Mr. Lai confessed on state television a year earlier. Pictures of a Beijing apartment, supposedly belonging to him, with safes and cabinets filled with bundles of cash, were broadcast.
Lai Xiaomin, who had previously worked at the central bank and for the banking regulator, said he had not “dared to spend a single cent”.