Ren Gulong and Zhang Jiaqi

NPL MARKET IN CHINA

As China’s economic growth slows down, non-performing loans (“NPLs”) continues to rise. According to the regulatory indicators released by the China Banking and Insurance Regulatory Commission (“CBRC”), the balance of commercial banks’ NPLs reached RMB 2.03 trillion by the end of the third quarter of 2018. CBRC urges Chinese banks to make greater efforts to manage and dispose of their NPLs. As a matter of fact, supportive policies have been consecutively enacted by Chinese government in recent years so that more investors are given opportunities to participate in China’s NPLs market.

The major players in China’s NPLs market are the big four state-owned assets management companies (“AMCs”), which were established by the Chinese government in 1999 to purchase NPLs from the big four Chinese commercial banks. Since CBRC allows setting up of local AMCs to participate in NPLs disposal in 2012, over 70 local AMCs haven been established. In June 2018, CBRC further issued Pilot Management Rules For Financial Assets Investment Companies (《金融资产投资公司管理办法(试行)), encouraging commercial banks to set up a subsidiary to engage in swap of NPLs into equities.

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Authored by Ren Gulong <Ren Gulong@anjielaw.com>, Zhang Jiaqi <zhangjiaqi@anjielaw.com> at AnJie Law Firm

Ren Gulong and Yang Anshu

In early December 2018, UBS AG increased its shareholding in its PRC subsidiary, UBS Security Co., Limited (“UBS China”), to 51%, making UBS China the first securities firm in China controlled by a foreign entity. This is an important event in the financial market and UBS AG certainly takes the advantage of China’s new measures to open up its financial market.

Measures of financial opening-up were provided in the government work report of 2018 issued in March. This opening-up process speed up due to the trade war tensions with the United States. At the Boao Forum in April 2018, President Xi Jinping announced further open up of Chinese financial market. Immediately after the announcement, Mr. Yi Gang, the governor of the People’s Bank of China (“PBOC”), disclosed details of the opening-up measures and a timetable. As responses to Mr. Yi’s timetable, the past year 2018 witnessed several new rules issued and old rules amended.

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Authored by Ren Gulong <rengulong@anjielaw.com>, Yang Anshu <Yang Anshu@anjielaw.com> at AnJie Law Firm