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Huarong debacle tests Beijing’s determination to release government agencies

When a former top debtor in China was assassinated in January, his focus was on the Rmb1.8bn ($ 280m) bribe that he was found guilty of.

The funds were squandered by Lai Xiaomin of Huarong Asset Management, who cases In addition to the misuse of debt-sharing power and bigamy, it was the largest since the establishment of the People’s Republic of China in 1949, according to the judge who presided over the case.

But interest in investors is now even greater: $ 22bn of dollar-made lawsuits owned by a state-owned company.

A selling in Huarong bindings, triggered by the group’s failure to release its financial results at the end of March, has been trying to ensure that Beijing regularly rescues state-owned companies that lend to global markets.

“Supervisors have to decide who can help them and how they can, and when they think, Western investors are alarmed, because it looks like an emergency if a company with 61% and the Ministry of Finance is hung up,” said Andrew Collier, an observer. senior accountant at Orient Capital Research.

$ 260bn

Goods stored by Huarong from June 2020

Prices for other Huarong products growing in 2022 fell to 67 cents a dollar last week. They recovered Tuesday after a Chinese inspector said last weekend that Huarong’s operations were “normal”, according to local reporters.

The company’s security was told via a WeChat website that it had paid off its maritime debt over the weekend. Big Western investors including BlackRock have invested in maritime companies, according to Bloomberg.

Another volatility came Tuesday night in Asia, Huarong tree prices fell after a study by US Reorg Research said Chinese regulators are considering a remake, citing sources familiar with the matter.

Huarong International, the company that provides or guarantees most of the company’s loans, said that the same day it returned to its original value in a statement posted on WeChat.

Experiments highlighted the need for markets to focus on Chinese government ideas in Huarong. The company did not respond to a request for comment.

The group is one of several large financial management companies China has set up a banking system following the Asian economic crisis in the late 1990s.

The company has stated that its failure to produce its financial results required the completion of the sale, without elaborating. This has led to a great deal of uncertainty about Huarong’s finances and the business affairs of his former chair.

Lai Xiaomin, a former Huarong Asset Management chief, goes to court at the Second Intermediate People’s Court of Tianjin in January © CCTV via AP

Caixin, a respected Chinese businessman, also said that during Lai’s assassination, his 100 tracts in southern China were allotted to his ex-wives and envoys. According to state media, Lai deposited Rmb300m in her mother’s bank account and kept tons of money at her home in Beijing.

Chengxin Credit, China Defense Agency, last week he warned due to the low business downturn and high debt, although it saved three times A. Western rating agencies have retained its monetary value in Huarong but have also issued similar warnings on its views or put it under review. S&P said this month that there was a “significant opportunity” for the company to benefit from government support.

The sale “reminds you that the only state-owned enterprise with shares does not mean you are putting yourself at high risk,” said Michel Lowy, a senior at SC Lowy, a troubled credit card holder with a small stake in Huarong bond. “It’s a little taken away from there.”

Fears on Huarong’s health were heightened by uncertainty over his assets. “We are trying our best to understand what was found and what the benefits are,” added Lowy.

His difficulties continued in Huarong. China Orient Asset Management, another manager of bad credit, said last week that it was difficult to lose an identifiable asset in 2020 due to coronavirus.

“What no one seems to be saying is that other AMCs [asset management companies] could be in trouble, “says Collier.” We don’t know… there is no demonstration. ”

Media reports of a possible restructuring in Huarong have raised concerns for the economy.

“Any damage to Huarong’s equipment will not only affect the company but also shake the foundations of Chinese government-led lawsuits as the finances of Chinese governments and other government agencies are tied,” said research firm CreditSights in a letter in April, although further losses were not possible.

Beijing’s response to Huarong may be more speculative than the amount of financial manager’s assets, researchers believe.

The Huarong scandal “could have serious repercussions where Asian buying companies are known around the world,” Lowy said. He added, “Supervision by investors can be overwhelming, and it should be.”

Extras quoted by Sherry Fei Ju in Beijing

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