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Unformatted text preview: 1.4 billion ($5 billion)
of NPLs from Bank of Communications at a 50% discount, funded entirely by a loan from PBOC.
Cinda has promised ultimate recovery of 30% to 40% of face value.
In August and September 2004, Bank of China and China Construction Bank was formally
incorporated as a state-controlled joint stock commercial banks respectively. Bank of China was
transformed into a stock limited company sponsored by Central Huijin Investment Co, and China
Construction Bank was split into China Construction Bank Corp. and China Jianyin Investment
Ltd. In April 2005, Central Huijing Investment Company injected a foreign exchange reserve of
US$15billion into ICBC and ICBC was officially transformed into a share holding company in
October that year.
In October 2005, China Construction Bank made a $9.2 billion initial public offering (IPO) on the
Hong Kong Stock Exchange, which is the world’s biggest IPO that year.
On June 1, 2006, Bank of China raised $9.7 billion through the sale of almost 25.57 billion shares
after pricing its initial public offering (IPO) in Hong Kong Stock Exchange. This is the world’s 140 研 究 所 年 報 biggest stock offering since 2000.
ICBC launched the world’s biggest dual initial public offering of US$21.9 billion in Hong Kong
and Shanghai stock markets in October 2006, which smashed the previous record, a US$18.4
billion IPO by Japanese mobile phone company NTT DoCoMo Inc. in 1998.
Although the investment in China’s SOCBs might be risky due to the large NPLs and bad
management, the success of their IPO is mainly due to the high growth rate of Chinese economy,
the large network of branches and the huge customer base of 1.3 billion people. NPL�Disposal�by�AMCs
The establishment of China’s four AMCs represents the most aggressive attempt so far by
the Chinese government to improve the SOCBs’ asset problems. Although these AMCs are
tasked with receiving, managing, and disposing of NPLs transferred directly from their affiliated,
“parent” SOCBs, they are wholly-owned by the central government and not by the Bank.
The recovery methods adopted by the Chinese AMCs include debt-for-equity swap,
r estructuring of debt terms, debt collection, sale or lease of real property, direct sales of
packaged or individual NPLs, and securitizations. The banks themselves have also applied some
of these measures to resolve their NPL portfolios, although they face much tougher regulatory
restrictions, such as prohibition from selling loans below book value.
The debt-for-equity swap program was implemented in 1999 for large and medium-sized SOEs
which is deemed having growth opportunities. This action wiped out the debt obligation of a SOE
to its bank and substituted it with the equity ownership of the AMCs that took over the NPLs
in question from the bank. At the same time, the NPLs at the Big Four were replaced with longterm bonds of the AMCs that paid a nice rate of interest and were effectively guaranteed by the
government. AMCs would then be entitled to d...
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This document was uploaded on 03/12/2014.
- Spring '14