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China's Cinda offers record US$7b in bad loans as economy slows

[HANGZHOU] China Cinda Asset Management offered on Thursday nearly US$7 billion in soured loans to investors in its largest ever sale, underscoring government pressure on banks and asset managers to settle China's debt pile as economic growth stalls.

Cinda is the only listed asset manager among the four bad loan companies set up by China's government a decade and a half ago and the country's second largest in terms of assets.

Its promotion comprised 35.3 billion yuan (S$7.7 billion) in outstanding principle and 8 billion yuan in interest from companies involved in everything from textiles and transport to home appliances and shipbuilding in eastern Zhejiang, which the bank regulator says saw the highest amount of bad loans among all Chinese provinces as of the end of last year. "Everybody is optimistic," Hu De, head of Cinda's Zhejiang branch, told Reuters at the sales event, which was held in a hotel ballroom in Hangzhou. "Many investors here have a real nose for the market." About a third of the nearly 1,700 bad debt portfolios on offer were from Wenzhou, a hub of start-ups and private firms. Investors from 120 institutions, including Goldman Sachs Group Inc and Oaktree Capital Management, attended the event.

China's economy is set to grow at its slowest pace in a quarter of a century, heightening Beijing's concerns about bad debts especially in the banking sector, where non-performing loans are rising at their fastest rate since 2004, data from the China Banking Regulatory Commission shows.

The amount of new non-performing loans in the first quarter has already reached 56 per cent of the total increase in NPLs last year, the regulator added. "It's a huge market that's going to become bigger and bigger," said Zhu Zhiqun, a Zhejiang entrepreneur who is setting up his own asset management company. "In some cities, less than 10 per cent of factories and companies are operating normally." Cinda's Zhejiang branch last year bought more than 70 bad loan packages from banks including Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China, the company said in its annual report.

In addition to the sales promotion, Cinda said it would increasingly use e-commerce giant Alibaba Group Holding Ltd's flagship marketplace Taobao to auction troubled assets. In March, Cinda's Zhejiang branch sold two factory debts for some 24 million yuan in its first such sale via the platform.