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State-owned asset companies reform share system before IPO

By Bi Xiaoning (China Daily)
Updated: 2008-11-28 10:30

China's four State-owned asset management companies will undertake reform in their shareholding system as early as the beginning of next year, according to an official meeting held on Wednesday.

For the IPO purposes of four State-owned banks, China established four State-owned asset management companies (AMCs) in 1999 to deal with non-performing loans of the banks. The duration of the AMCs was set for 10 years.

As the Macaulay duration of AMC is drawing near, top officials with the legal offices of the State Council, the Ministry of Finance, the central bank, four State-owned banks and AMC held a meeting Wednesday to discuss key issues in AMC reform. These included financial restructuring, business scope and the direction of reforms.

According to the Ministry of Finance's plans, the reform of AMC will start by dividing political non-performing assets from commercial ones. Then, it will be followed with financial restructuring, the reform of shareholding system and finally the IPO.

All four AMC companies, except China Great Wall Asset Management Corp, China Cinda Asset Management Corp, China Orient Asset Management Corp, China Huarong Asset Management Corp have made out transformation plan. According to close resources, the plans of the four companies will be confirmed as early as the beginning of next year.

According to the draft, Huarong plans to increase its registered capital from 10 billion yuan to 19.5 billion yuan, with an ICBC investment of 20 billion yuan. ICBC will hold 48 percent of the shares based on 1.5 time of PB. China Construction Bank will invest 23.7 billion yuan on Cinda and hold 49 percent of shares based on 1.5 time of PB. China Orient will involve the Bank of China as a strategic investor after the classification of non-performing assets.

Since the shareholding reform of Agricultural Bank of China is still under way, China Great Wall Asset Management Corp has not come out with any plans yet.

China Business New cited a close source as saying that the possible plan is as follows: the interest rate of re-lending from the central bank will cease as of the beginning of 2008, meanwhile, the losses will be cleared. 820 billion yuan of financial bonds issued by AMC will last for the coming 10 years and keep a fixed interest rate of 2.25 percent. The financial losses will gradually be remedied by dividends from the State-owned shareholders of listed banks and AMC, taxes and share selling.

Huarong and Cinda even estimate that after the reform of the shareholding system, the dividend for State-owned shareholders will reach 120 to 140 billion yuan in 10 years.