The era of the Big Four Asset Management Companies (AMCs) in the past 25 years may usher in changes. Following the official name change of China Huarong, the other three AMCs also have new trends. Recently, it was reported that China Cinda, Orient Asset Management and Great Wall Asset Management will be transferred to China Investment Corporation (hereinafter referred to as "CIC") in the near future.
On January 29, a reporter from Beijing Business Daily learned from a person familiar with the matter that the news is true, but it still needs to be cleared and verified, due diligence and other procedures, and it is not a recent transfer, and the transfer of the three major AMCs to CIC is mainly in response to the institutional reform plan, which is in line with the previous reform of the financial regulatory system.
or material changes
AMC has a new trend. On January 28, according to Xinhua Finance and Economics, three AMCs, China Cinda, Orient Asset Management and Great Wall Asset Management, will be transferred to CIC in the near future. On January 29, a reporter from Beijing Business Daily learned from people familiar with the matter that the news was true and had been determined after the Central Financial Work Conference, but the transfer time was not in the near future, and more procedures such as asset verification and due diligence were still needed.
The transfer of the three major AMCs to CIC may be in response to the institutional reform plan. "The transfer of the three AMCs to CIC is part of the reform of the financial system, which is in line with the reform of the financial regulatory system last year," the person said.
Image source: Yitu.com
It is understood that in March 2023, the Central Committee of the Communist Party of China and the State Council issued the "Plan for the Reform of Party and State Institutions", which clearly improves the management system of state-owned financial capital, "in accordance with the relevant management regulations of state-owned financial capital investors, the market operation institutions managed by the central financial management department will be divested, and the relevant state-owned financial assets will be transferred to the state-owned financial capital trustee management institution, which shall perform the duties of the investor in a unified manner according to the authorization of the State Council".
As for the reasons for improving the management system of state-owned financial capital, the relevant person in charge at that time introduced that it was mainly to clarify the relationship between the rights and responsibilities of the financial regulatory departments, the institutions that perform the duties of state-owned financial capital investors and the state-owned financial institutions, promote the separation of management and management, and the separation of government and enterprises, so as to promote the sustainable and healthy development of state-owned financial institutions.
According to the official website, CIC was established on September 29, 2007 and has three subsidiaries, namely CIC International Co., Ltd., which is responsible for overseas investment business, CIC Overseas Direct Investment Co., Ltd., and Central Huijin Investment Co., Ltd., which is authorized by the State Council to make equity investments in key state-owned financial enterprises.
According to the above-mentioned insiders, the proportion of equity to be transferred and the takeover of CIC have not yet been decided, and it depends on the subsequent liquidation and capital verification, due diligence and the formulation of reform plans.
Liao Hekai, an analyst at Jinle Function, believes that the transfer of the three major AMCs to CIC means that the four major AMCs of the Ministry of Finance have completed their historical mission and need to be reformed. Following China Huarong, the marketization of the three AMCs will also be completely opened, emphasizing the company's attributes, strengthening corporate governance and operation, and starting again as a more standardized market participant.
The management system may change
Looking back at the history of the four major AMCs, it can be traced back to 1999, when the Ministry of Finance invested 40 billion yuan to establish China Huarong, China Cinda, Great Wall Asset Management and Oriental Asset Management to divest and dispose of the non-performing assets of the four major state-owned banks of Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China and other financial institutions.
After 2009, the four major AMCs began to transform towards commercialization, during which the four major AMCs successively completed the shareholding reform, and China Cinda and China Huarong were successively listed on the Hong Kong Stock Exchange.
Since 2022, the four major AMCs have kicked off the "embrace" of the Ministry of Finance. In March 2022, China Huarong (now renamed "CITIC Financial Assets") announced that in order to optimize the layout of state-owned financial capital, the Ministry of Finance increased the company's 2.407 billion domestic shares to CITIC Group, and after the change in equity, the Ministry of Finance's shareholding ratio fell to 24.76%, and CITIC Group's shareholding ratio rose to 26.46%, becoming the largest shareholder.
Subsequently, China Huarong gradually integrated into CITIC Group, and the management successively welcomed CITIC executives to settle in, and it will also usher in an official name change in 2024. On January 26 this year, China Huarong officially changed its name to CITIC Financial Assets, and the company previously revealed that "the implementation of the name change will help rely on the brand value of CITIC Group, promote business development, and further promote the company's high-quality transformation and development;
The above-mentioned people familiar with the matter said that although the specific transfer plan of the three AMCs has not yet been clarified, it is expected that similar to the merger of China Huarong into CITIC Group, the three AMCs will still operate independently after the transfer, and it is expected that the business and positioning will not change, but the management system should change.
A reporter from Beijing Business Daily combed and found that the Ministry of Finance is currently the largest shareholder of the three AMCs, holding 58%, 73.53% and 71.553% of the shares of China Cinda, Great Wall Assets and Oriental Assets respectively.
Industry insiders believe that the transfer is only a change in shareholders and has little impact on the actual business operations of the three major AMCs. Dong Ximiao, chief researcher of Zhaolian, said that the transfer of the three major AMCs to CIC is mainly based on the deployment of the reform of the financial management system, and after the transfer, the positioning and development of the AMCs will not change, but the management relationship will change.
Focus on the main business of disposal of non-performing assets
After the completion of the commercial transformation, the four major AMCs have successively started to expand their financial territory, covering banking, securities, leasing, trust, futures, consumer finance and other fields. However, since the exposure of China Huarong's risks, AMC has set off a curtain of correction, and then the four major AMCs have gradually divested non-main business assets and started "slimming".
China Cinda transferred Happy Life, Great Wall Asset transferred the equity of local AMC, Orient Asset sold the small loan company, and China Huarong before the name change successively completed the equity sale of five licensed subsidiaries.
Dong Ximiao said that previously, a small number of AMCs had blindly expanded, involving more non-main businesses. In recent years, the financial management department has been urging AMC to return to its roots and main business. In the past three years, the mainland has disposed of 3 trillion yuan of non-performing assets every year, and the market for non-performing assets disposal is broad, and there is enough room for AMC to return to its origins, but AMC needs to improve its ability to dispose of non-performing assets to better meet the needs of different fields and institutions in the disposal of non-performing assets.
After divesting the non-main business and reviewing the main business of non-performing assets, the four major AMCs have successively focused on small and medium-sized financial institutions and real estate risk resolution. For example, Orient Assets previously revealed that from 2021 to June 2023, the company acquired a total of 140.712 billion yuan of non-performing assets of small and medium-sized financial institutions through various forms such as acquisition and disposal of non-performing assets and risk resolution funds. As of the end of June 2023, the company has carried out a total of 47 real estate risk mitigation projects, promoting the timely delivery of 36,800 commercial houses.
For the 2024 work plan, CITIC Financial Assets, which has completed the name change, recently held a 2024 work conference, making it clear that in 2023, it is expected to turn losses into profits on the basis of deducting about 40 billion yuan from valuation. Focus on strengthening the main business, increasing income, enhancing the core competitiveness of the main business, reducing the stock, preventing new additions, and improving the quality of risk resolution.
From the Ministry of Finance to the "Zhongzitou", what will be the development prospects of the four major AMCs in the future? Liao Hekai said that the development prospects of the four major AMCs in the future are still broad and they are still the most important participants in the asset management industry in the mainland. With the country's increasing emphasis on risk prevention and mitigation in key areas, the four major AMCs can play their unique role in resolving the risks of the real estate market, local debt, and small and medium-sized financial institutions from the perspective of longer-term participants, which is also to reserve "grain and grass" for the business development of the next economic cycle and contribute to the stability of the mainland's economic development.
"The disposal of non-performing assets of small and medium-sized banks is one of the business growth points of AMC, and AMC can further improve its service capabilities for the disposal of non-performing assets of small and medium-sized banks and broaden the channels for the disposal of non-performing assets of small and medium-sized banks. At the same time, it can also strengthen the output of capacity and help local AMCs improve their ability to dispose of non-performing assets. Dong Ximiao suggested.
Beijing Business Daily reporter Li Haiyan