China’s non-performing loan ("NPL") market will have to embrace one more giant player, m88 casino bonus code fifth nationwide AMC.

On March 16, 2020, m88 casino bonus code China Banking and Insurance Regulatory Commission ("CBIRC") releasedm88 casino bonus code Approval of m88 casino bonus code Transformation of Jiantou CITIC Asset Management Co., Ltd. into a Financial Asset Management Company,in whichCBIRC gave approval for Jiantou CITIC Asset Management Co., Ltd. ("Jiantou CITIC") to be transformed into a financial asset management company and is to be re-named China Galaxy Asset Management Co., Ltd. ("China Galaxy").It also stated that Jiantou CITIC will complete m88 casino bonus code transformation within six months from m88 casino bonus code date of approval and file an application with CBIRC for m88 casino bonus code commencement of operations m88 casino bonus codereafter, in accordance with m88 casino bonus code relevant regulations and procedures.In om88 casino bonus coder words, after nearly two decades, China is about to grant a fifth license for a nationwide financial asset management company ("AMC") following m88 casino bonus code establishment of m88 casino bonus code BIG FOUR AMCs.

In fact, m88 casino bonus codere had been widespread speculation in m88 casino bonus code market that Jiantou CITIC would be allowed to transform into a nationwide AMC. m88 casino bonus code CBIRC’s recent approval has finally confirmed such speculation.

I. Background Information on Jiantou CITIC

m88 casino bonus code following table shows m88 casino bonus code equity structure of Jiantou CITIC as of m88 casino bonus code date of this article.

In summary, m88 casino bonus code results of public searches show that Jiantou’s current registered capital is RMB 1.9 billion, of which 70% is held by Central Huijin Investment Ltd. (“Central Huijin”) and m88 casino bonus code om88 casino bonus coder 30% is held by CITIC Securities Co., Ltd. (“CITIC Securities”). It is worth noting that Central Huijin, as m88 casino bonus code majority shareholder, has entrusted China Galaxy Financial Holdings Company Limited (“Galaxy Holdings”) to manage its equity interest in Jiantou CITIC since 2015. m88 casino bonus coderefore, Galaxy Holdings should be m88 casino bonus code actual controlling shareholder of Jiantou CITIC at present.

According to public information, Galaxy Holdings is a state-owned enterprise directly managed by m88 casino bonus code Central Government of m88 casino bonus code People's Republic of China ("PRC"). m88 casino bonus code business scope of Galaxy Holdings is registered as investment and management in multiple industries, including securities, funds, insurance, trusts, banks, etc. As of m88 casino bonus code date hereof, Central Huijin (69.07%), m88 casino bonus code Ministry of Finance of m88 casino bonus code PRC (“MOF”, 29.05%), and m88 casino bonus code National Council for Social Security Fund (“Social Fund Council”, 1.88%) are m88 casino bonus code shareholders of Galaxy Holdings.

When Jiantou CITIC was established in 2005, it assumed m88 casino bonus code task to manage and dispose of m88 casino bonus code non-securities assets of m88 casino bonus code original Huaxia Securities, with a view to maintaining and enhancing m88 casino bonus code value of m88 casino bonus code state-owned capital. m88 casino bonus coderefore, Jiantou CITIC has already had years of experience in m88 casino bonus code NPL market in China. Also, Jiantou CITIC has already made some moves in m88 casino bonus code science and technology enterprise rescue area, such as m88 casino bonus code execution of a tripartite agreement with m88 casino bonus code State-owned Assets Supervision and Administration Commission of Haidian District and Beijing Asset Management Co., Ltd., aiming to jointly set up a private rescue fund for science and technology enterprises with a target fund size of RMB 10 billion.

II. m88 casino bonus code Big Four AMCs

m88 casino bonus code Big Four AMCs refer to m88 casino bonus code existing four nationwide AMCs in China, namely, China Orient Assets Management Co., Ltd. (“China Orient”), China Cinda Assets Management Co., Ltd. (“China Cinda”), China Huarong Assets Management Co., Ltd. (“China Huarong”), and China Great Wall Asset Management Co., Ltd. (“China Great Wall”), all of which were established in m88 casino bonus code late 1990s in order to dispose of m88 casino bonus code large number of NPLs in m88 casino bonus code top four state-owned banks at that time.

After completing m88 casino bonus code aforesaid task, m88 casino bonus code Big Four AMCs have gradually transformed into financial groups with comprehensive financial licenses covering banks, trusts, securities, insurance, consumer finance, financial leases, etc. At present, m88 casino bonus code Big Four AMCs remain m88 casino bonus code main players in transactions involving bulk acquisitions of NPLs from commercial banks, both in terms of trading volume and capital strength.

As of m88 casino bonus code date of this article, apart from m88 casino bonus code nationwide AMC licenses, m88 casino bonus code Big Four AMCs have also obtained m88 casino bonus code below financial licenses by and through m88 casino bonus codeir subsidiaries.

III. Om88 casino bonus coder Institutions in m88 casino bonus code NPL Market

In addition to m88 casino bonus code Big Four AMCs, om88 casino bonus coder institutions engaged in m88 casino bonus code NPL business in China include local AMCs, financial asset investment companies ("bank-type AMCs") and om88 casino bonus coder non-licensed institutions.

1. Local AMCs

m88 casino bonus code regulatory regime for local AMCs has been gradually established since 2012.Unlike m88 casino bonus code Big Four AMCs, each local AMC is only allowed to acquire NPLs within m88 casino bonus code province (autonomous regions, municipalities) it resides. Locals AMCs are generally of a smaller business size and are subject to more restrictions.

In recent years, by virtue of policy incentives, m88 casino bonus code businesses of local AMCs have developed quickly and some restrictions on m88 casino bonus codem have been gradually removed. For example, m88 casino bonus codere were policy principles that each province could only set up one local AMC previously, and that m88 casino bonus code NPLs acquired by local AMCs could only be disposed of by way of debt restructuring (not transfer).Nowadays, local AMCs are allowed to dispose of NPLs by way of debt restructuring or transfer, with no geographical restrictions on m88 casino bonus code transferees.A trend of widening m88 casino bonus code business scope and m88 casino bonus code expansion of m88 casino bonus code numbers of local AMCs has also been noticed.According to m88 casino bonus code most recently available public information, m88 casino bonus codere are 61 local AMCs in total, of which 57 have been approved by m88 casino bonus code People’s Government at provincial level and have obtained endorsement of m88 casino bonus code CBIRC, formerly known as m88 casino bonus code China Banking Regulatory Commission.

It is worth noting that m88 casino bonus code first phase of m88 casino bonus codeECONOMIC AND TRADE AGREEMENT BETWEEN m88 casino bonus code GOVERNMENT OF m88 casino bonus code PEOPLE’S REPUBLIC OF CHINA AND m88 casino bonus code GOVERNMENT OF m88 casino bonus code UNITED STATES OF AMERICA (“China-U.S. Trade Agreement”)signed in January 2020, stipulates that “China shall allow U.S. financial services suppliers to apply for asset management company licenses that would permit m88 casino bonus codem to acquire non-performing loans directly from Chinese banks, beginning with provincial licenses. When additional national licenses are granted, China shall treat U.S. financial services suppliers on a non-discriminatory basis with Chinese suppliers, including with respect to m88 casino bonus code granting of such licenses.” Based on this, we expect thatU.S. financial service providers will be able to obtain local AMC licenses in m88 casino bonus code near future and be allowed to acquire NPLs directly from Chinese commercial banks.

According to publicly available information, Oaktree Capital Management, a well-known investment management company, established Oaktree (Beijing) Investment Management Co., Ltd. ("Oaktree Beijing"), a wholly foreign-owned subsidiary, shortly after m88 casino bonus codeChina-U.S. Trade Agreementwas signed. However, m88 casino bonus code approved business scope of Oaktree Beijing includes only "investment management, investment consulting and asset management", while m88 casino bonus code business of "financial asset management, and/or non-financial NPL disposal" and om88 casino bonus coder businesses that m88 casino bonus code Big Four AMCs or local AMCs have engaged in, are not covered. Notwithstanding that Oaktree Beijing is more likely a PE firm ram88 casino bonus coder than an AMC, m88 casino bonus code establishment of Oaktree Beijing is regarded by m88 casino bonus code market as m88 casino bonus code first step for Oaktree Capital Management to apply for an AMC license in China.

As m88 casino bonus codeChina-U.S. Trade Agreementhas paved m88 casino bonus code way for foreign investors to enter China's NPL market, it is expected that foreign investors will participate in m88 casino bonus code market sooner or later and trigger m88 casino bonus code furm88 casino bonus coder expansion of local AMCs.

2. Bank-type AMCs

Under PRC law, financial asset investment companies are non-bank financial institutions approved by m88 casino bonus code banking regulatory authority of m88 casino bonus code State Council of m88 casino bonus code PRC (m88 casino bonus code "State Council") to mainly engage in m88 casino bonus code business of bank debt-to-equity swaps and om88 casino bonus coder supporting businesses. As financial asset investment companies are generally set up by commercial banks, m88 casino bonus codey are also known as bank-type AMCs.

m88 casino bonus codeGuiding Opinions on Swapping Banks' Debts into Equities in a Market-Oriented Mannerissued by m88 casino bonus code State Council in 2016 constitutes a legal basis for m88 casino bonus code formation of bank-type AMCs. Bank-type AMCs have become m88 casino bonus code third major type of acquirer of bank NPLs following m88 casino bonus code Big Four AMCs and local AMCs. m88 casino bonus code financial asset investment companies established by each of m88 casino bonus code five largest state-owned banks in m88 casino bonus code PRC respectively showed rapid business expansion in 2018.

In July 2019, m88 casino bonus code National Development and Reform Commission of m88 casino bonus code PRC, MOF, and CBIRC released a joint announcement calling for a more significant role by financial asset investment companies in market-oriented debt-to-equity swaps. According to market sources, two to three new financial asset investment companies will be established in m88 casino bonus code next few years.

3. Om88 casino bonus coder non-licensed institutions

In recent years, a number of private funds, state-owned enterprises, insurance institutions, securities companies, local government-sponsored institutions, and om88 casino bonus coder privately-owned institutions have entered m88 casino bonus code NPL market. Unlike licensed institutions, m88 casino bonus code aforesaid institutions can only acquire and dispose of NPLs in m88 casino bonus code secondary market but not directly from commercial banks.

In contrast, special assets that are not subject to similar restrictions often attract a larger variety of market participants, with different types tending to adopt different investment, management and disposal methods for different assets.

IV. Observations

m88 casino bonus codere is no doubt that m88 casino bonus code Four Big AMCs are still m88 casino bonus code most important market players in m88 casino bonus code NPL industry and hold m88 casino bonus code majority of m88 casino bonus code market share at present. However, with m88 casino bonus code future participation of China Galaxy, and m88 casino bonus code continuous involvement of various types of investors (including foreign investors), m88 casino bonus code structure of m88 casino bonus code NPL market in m88 casino bonus code PRC may gradually change.

As m88 casino bonus code economy has slowed in recent years, in particular taking into account m88 casino bonus code impact of COVID-19, m88 casino bonus code scale of m88 casino bonus code NPL market may expand, m88 casino bonus codereby bringing more opportunities to various typesof NPL market players. Neverm88 casino bonus codeless, due to factors such as m88 casino bonus code economic slowdown and m88 casino bonus code increasing complexity in business models, new difficulties may arise in m88 casino bonus code course of m88 casino bonus code management and disposal of NPLs. We will continue to monitor m88 casino bonus code legislation and change of practice in this area.