Developing the Asian Markets PRC Experience

1
Developing the Asian MarketsPRC Experience

• David Kidd
• Allen Overy
• 11 November 2003

ALLEN OVERY
2
PRC NPLs - the story so far

• AMCs (Cinda, Huarong, Great Wall, China Orient)
  established in 1999
• 1.4 trillion yuan (US170 billion) transferred by
  ICBC, BOC, CCB and ABC
• To date 21.5 sold by AMCs
• NPLs cloud Big Four banks - 6.11.03

ALLEN OVERY
3
Resolution issues

• Legal framework
• State ownership
• Real estate
• Restructuring culture

ALLEN OVERY
4
Legal framework

• 1986 Trial Bankruptcy Law
• 1991 Civil Procedure Law
• 2002 Supreme Court interpretation
• New law in 2004?
• GITIC landmark (cf GDE)
• Judiciary

ALLEN OVERY
5
State ownership

• PRC a socialist centrally planned economy
• Approval processes are slow
• Move towards private ownership and improved
  corporate governance
• Role of SOEs in employee welfare

ALLEN OVERY
6
Real Estate

• All land owned by state (urban) or collectives
  (rural)
• Allocated/Granted/Leased
• Security over tangibles
• Enforcement slow
• Employee rights

ALLEN OVERY
7
Restructuring experience

• GDE/FJE/ITICs/Zhu Kwan
• Government support after GITIC
• Inertia, indecision and limited local experience
  (but no dominant family interests)
• Must combine international experience with local
  knowledge through strong servicing vehicles

ALLEN OVERY