Cinda warns trust defaults are rising rapidly
March 31, 2014 Category Finance, Weekly
Bad debt is on the rise, with bad-debt manager China Cinda Asset Management warning that a default peak season is approaching after years of rapid yet questionable growth. The company, established 15 years ago by the central government to buy back bad loans from big banks, is seeing buying opportunities emerging as baskets of trust products are expected to go sour and commercial banks come under greater pressure to sell non-performing loans amid liquidity pressure. “China’s trust products have been increasing by 50% annually over the past years, a pace that is problematic,” Cinda President Zang Jingfan told a press briefing in Hong Kong. “Trust defaults could explode in a concentrated period of time.” Cinda Vice President Wu Songyun said the total amount of trust products in China was CNY10.9 trillion, most of which had been built up in the past four years. UBS estimates that more than 20 trust products worth CNY23.8 billion have encountered payment difficulties since 2012. Trust companies have acted as intermediaries to arrange funding from wealthy investors for firms operating in industries that banks have spurned, such as coal, solar energy and property. China has witnessed two defaults of trust products this year. At the end of last year, Cinda was holding CNY2.9 billion worth of trust products, of which one third was available for sale, according to its annual report, the South China Morning Post reports.
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