Chinese asset management companies (AMCs) are going to benefit from rising demand in the market as commercial banks continue to offload non-performing assets from their books, according to a market player.
“In recent years, commercial banks have been under huge of pressure from the regulators to speed up the management and sales of their non-performing assets (NPAs),” Jacky Zhang, a director of Dongju United Capital, which is a Hengqin-based AMC, said in an interview.
Zhang said the number of problematic companies and non-performing corporate debts would gradually increase due to the elimination of obsolete capacities and “zombie companies” amid supply-side structural reform in China.
“AMCs will see more business opportunities as there are more and more NPAs in the market while their prices continue to drop,” he said.
In 1999, the big four state-owned AMCs, which included China Orient Asset Management Co Ltd, China Cinda Asset Management Co Ltd, China Huarong Asset Management Co Ltd and China Great Wall Asset Management Co Ltd, were established in China with funds granted by the Ministry of Finance.
In 2020, China Galaxy Asset Management Co Ltd was registered as the fifth AMC at the national level.
Throughout the years, these five companies have formed joint ventures with private companies in cities and provinces across the country. These joint ventures were encouraged by regulators, including the China Banking and Insurance Regulatory Commission, to develop new financial tools to manage NPAs.
Innovative services
As the traditional way of managing NPAs by “discounting, packaging and litigating” had already failed to meet market demand, regulators encouraged AMCs to use innovative and tailor-made methods to revitalize their clients’ NPAs, which include accounts receivable and intangible assets, Zhang said.
AMCs could help their clients restructure their debts, assets and businesses, issue debt-to-equity swaps and securitize their NPAs, he said. They could also provide them with consultation services, he added.
Among its peers, Dongju United Capital has been one of the fastest-growing AMCs in mainland China during the past few years.
Established in 2017, Dongju United Capital was a joint venture of the Bangxin Asset Management Co Ltd, Daye Trust Co Ltd, Shenzhen Fengju Asset Management Co Ltd and Dalian Financial Industry Investment Group Co Ltd.
China Orient Asset Management is a direct shareholder of Bangxin Asset Management and Daye Trust and an indirect shareholder of Dalian Financial Industry Investment.
Recruitment of talent
With its headquarters in the Hengqin FTA, Zhuhai, and its entity operation headquarters in Shenzhen, Dongju United Capital has adhered to non-performing asset management as the main business, and actively expanded to other asset management and private equity businesses.
The company is also engaged in troubled institution hosting and clearing operation businesses.
“We will adhere to the development concept of ‘having a foothold at home, looking at the whole world, and serving customers,’ and seize the opportunity of China’s financial market,” Zhang said.
“We will give full play to the role of financial assistance and counter-cyclical regulation, further improve the quality and efficiency of serving the real economy, and build Dongju United Capital into a high-quality financial enterprise with an international vision.”
Zhang said Dongju United Capital now had about 100 employees and would continue to recruit talent from top Chinese universities. He said the company would apply for a listing on the National Equities Exchange and Quotations (NEEQ), or the “New Third Board,” in 2021.
Real estate project in Dalian
In the past few years, Dongju United Capital widely absorbed funds, including those of trust institutions, commercial banks and other various kinds of funds from domestic and foreign markets.
It accurately displayed the combination effect of financial instruments and actively participated in the operation of the non-performing asset market to revitalize financial assets, defuse financial risks, maximize and sustain the return on investment with a vigorous attitude, professional focus and solid strength.
In April 2018, the company officially became a member of the China AMC Development 50 Forum. Last October, the company sponsored and hosted the first “Non-performing Assets Trading Conference” and the third “China AMC Development 50 Forum.”
In May 2020, the company announced a change to the name of its unit in Dalian from “Orix Real Estate (Dalian) Co Ltd” to “Dongju United (Dalian) Real Estate Co Ltd” and made adjustments on the project management mode and procedures.
Dongju United (Dalian) Real Estate is managing a property project at the D02-02 area in Dalian Donggang District. The project is jointly developed by the Japan Orix Group, the China Orient Asset Management, the Dalian Financial Industry Investment and Dongju United Capital.
It spans Northeast Asia and is an urban complex integrating “an international financial center, Sino-Japanese economic and cultural exchange hub, innovation industry cluster” and “citizens’ fine gathering area.”
The project has high-end international and regional support, a three-dimensional transportation network and first-rate seascape resources. The total area of the project is 25,000 square meters and the gross building area is 246,457 square meters.
Top 10 AMCs
On Thursday, Dongju United Capital was selected as one of the top 10 fastest-growing AMCs in China, according to research done by the Asian Economic Research Institute (AERI), a research arm of Asia Times.
The top 10 AMCs, which are either joint ventures of the state-owned-enterprises and private companies or entirely privately-owned firms, have optimized their businesses by adopting international standards while using their local and global networks to source buyers, said the AERI.
Over the past several years, these firms have dedicated themselves to non-performing asset management businesses with some of them being diversified to other investment and private equity businesses.
The list was compiled based on four key business performance indicators, which include the growth rates of the candidates’ revenue, the complexity of the projects they handled, the qualifications of their management teams and their ability to source buyers.