[Marxism] The bad loans business in China
andromeda246 at hetnet.nl
Mon Dec 13 14:36:46 MST 2004
China's $438 Billion of Bad Debt Mounts as Buyers `Losing Hope'
Dec. 14 (Bloomberg) -- Jack Rodman, a partner at Ernst & Young LLP's
Asia-Pacific unit, has spent four years pushing China to sell its $438
billion in bad bank loans to overseas investors. His result: One $1.3
billion sale agreed, approved and completed.
Just 6 percent of $71 billion in debt settled since 1999 will go to overseas
buyers such as Citigroup Inc., Morgan Stanley and Deutsche Bank AG. More
than two-thirds of that 6 percent is still awaiting approval by government
agencies. International banks are missing out on a potential $40 billion in
purchases that could generate as much as $8 billion in profit.
``Foreigners are losing hope,'' says Rodman, 58, who advises China's
state-owned debt sellers and banks in Beijing.
Buyers targeting the world's No. 2 bad-loan market aren't seeing the deals
that helped Japan's banks clear $600 billion of debt in seven years. China
doesn't have the gumption to resolve five decades of misguided state
lending, says Tim Clissold, a former manager at Goldman Sachs Group Inc. in
``This is an incredibly sensitive political issue, involving the write-off
of billions of dollars in state-owned assets,'' says Clissold, 44, now a
partner at Beijing-based private-equity firm Asset Management & Recovery.
``There's no political will to streamline the process and make it more
transparent to push these things through.''
About three-quarters of the $71 billion resolved so far has been settled
with borrowers, mainly state-owned companies, New York-based accounting firm
Ernst & Young estimates. Since September, China's four asset managers have
sold an additional $22 billion of bad debt -- loans that borrowers can't
repay -- to each other or to related companies.
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