Wednesday, June 08, 2005
As per the last posting about corruption in the AMCs, someone asked me how much money is lost to corrupt AMC deals. In truth, I have no idea, but here is my reply.
I really don't know how much is lost through this kind of corruption, but from my interviews, it seems that things are getting better. In 2001, foreign bankers demanded a really low price from the Chinese government because there was such an informational vacuum. So even legal deals approved by the State Council were sealed below market price. But as the market became more established and as Chinese real estate prices increased, deals became more transparent, and prices for NPLs rose. I have even heard of some cases where investors paid full face value for some collateral in Guangdong...etc. Also, the most recent transfers include much better quality assets that are expected to yield over 30% of face value.
I really don't know how much is lost through this kind of corruption, but from my interviews, it seems that things are getting better. In 2001, foreign bankers demanded a really low price from the Chinese government because there was such an informational vacuum. So even legal deals approved by the State Council were sealed below market price. But as the market became more established and as Chinese real estate prices increased, deals became more transparent, and prices for NPLs rose. I have even heard of some cases where investors paid full face value for some collateral in Guangdong...etc. Also, the most recent transfers include much better quality assets that are expected to yield over 30% of face value.
Comments:
This is rather beside the point of this particular posting. But judging by some of your previous posts, you see the hand of Zhu Rongji in some of the Wen administration's moves. In a recent Asia Society event in LA, William Overholt remarked that Zhu's work in cleaning the red ink from China's banks is but half-done. After Zhu left the premier's post, bad debts are accumulating again. How do you compare Wen and Zhu's skill in dealing with banks?
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