China plans US$7b Huarong recapitalisation led by Citic

[BEIJING] China Huarong Asset Management is poised to receive about US$7.7 billion of fresh capital as part of an overhaul plan that would shift control of the embattled company to state-owned conglomerate Citic Group, people familiar with the matter said.

The plan, some details of which are still being finalised and could change, calls for Citic to assume the Chinese government's controlling stake in Huarong from the Ministry of Finance, the people said, asking not to be identified discussing a private matter. The capital injection would come from a Citic-led consortium, two of the people said.

The broad outlines of the plan - some of which were reported earlier this week by REDD - have been approved by China's State Council and could be announced as soon as this week, the people said.

If Beijing follows through, it would mark the first major attempt to resolve a crisis that has roiled the world's second-largest credit market since April. Huarong's plight has become the biggest test in decades of Chinese authorities' willingness to support troubled state-owned borrowers amid a record wave of defaults.

BLOOMBERG