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Fund backs banking system
The Asian Development Bank (ADB) has approved an equity investment of up to US$45 million in a fund that will provide support to China's banking system by investing in non-performing loans (NPLs) distressed real estate assets, and distressed but viable State-owned enterprises. The Yangtze Special Situations Fund aims to restructure these investments and reintegrate them into more productive segments of the Chinese economy. Although China has posted average annual growth of 7.9 per cent since 1995, systemic risks will need to be addressed if this level of growth is to continue. "Rapid growth in China has outpaced the establishment of sound regulations and corporate governance, something ADB is addressing through its public sector window in a top-down approach," says Robert Bestani, director general of ADB's Private Sector Operations Department. "ADB's Private Sector Operations is working from a complementary bottom-up approach towards the same goal. ADB aims to foster and catalyze the expertise that can bring the capital and technical know-how to address China's NPL problem," Bestani adds. Policy reform projects and private sector development create a balance to achieve a sound and efficient banking system in China. ADB will use the fund as a platform for further transactions in the country's distressed debt market. The fund is managed by Colony China in conjunction with a local partner, Shanghai Industrial Development Corp, a subsidiary of Shanghai Industrial Investment (Holdings) Co Ltd. An investment committee will make all investment and divestment decisions for the fund based on approved policy guidelines. As the anchor investor, ADB is represented in the Investment Committee and Advisory Board of the fund. Subject to market conditions, the fund aims to raise up to US$450 million before its closing date. |
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