China's Big Bang Bombshell: Beijing Opens Financial Sector To Foreign Ownership, But Why Now?

Ren speculates where foreign firms might be able to play a role in saving some of these banks.

The one area that may be of interest to foreigners is bad-debt asset management firms. Beijing has been urging lenders to set up soured-loan managers to conduct debt-for-equity swaps and offload unmet obligations. Pricing and restructuring bad debt, however, is so technical and tiresome that even China's two most prominent specialists, China Huarong Asset Management Co. and China Cinda Asset Management Co., have been busy earning their keep in the offshore high-yield corporate bond market. But, as I wrote in August, Beijing is serious about reducing corporate debt and establishing new asset-management companies for that purpose. Authorities want the firms to have a wide range of financing options open to them, from bond issues to private placements and perhaps even tapping interbank liquidity. Although China's capital markets are getting deeper by the day, more external expertise wouldn't go amiss. So far, only about 10 percent of the announced 1 trillion yuan ($151 billion) of debt-swap deals have been funded, in part because private-sector investors aren't interested. That's where foreign financial institutions should be turning their attention. There's business here for the taking.

We wouldn’t disagree, which that's why our initial reaction to the news last night was... skeptical.

To be sure, a foreign bailout masked as investment would certainly help, however, we share the sentiment that it’s probably too late.

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