This updated report on the development of the AM market in China is a primer covering the early and ongoing developments in the sector.
China initially had four financial AMCs, each paired with one of the main commercial banks.All AMCs remain under the supervision of Peoples Bank of China with input from the State Securities Supervisory Committee of China and the Ministry of Finance.
In many ways China’s AMCs are an arm of the state.
Currently their major activity is debt-equity swaps, which are selected by the State Economic and Trade Commission (SETC) and not the AMCs themselves.
In this way the AMCs are a crucial part of Beijing’s overall restructuring programme for the state owned sector in China.
Over the long term the AMC’s are aiming to recover approximately RMB 1 trillion in non-performing loans owed to the country's four major state-run commercial banks by China’s loss-making state-owned enterprises.
This is a major task for the AMCs given that China’s state owned industries are estimated to face US $200 billion in bad debts.
The longer-term aim of the AMCs is to rehabilitate the loss making large state owned companies and eventually liquidate their stakes by selling or listing the shares of the firms.
However, whether the AMCs will be able to revive the firms and find a market for their shares remains to be seen.
The AMC’s are also crucial to the development of China’s banking sector.
By allowing the AMC’s to handle the state banks?debt burden which was accrued through government directed lending since the 1950s, ultimately the four banks should be able to clear their loan books and commence a new lending policy based on a client's creditworthiness.