Asset Manager Great Wall Reveals $6.7 Billion Net Loss in Delayed 2022 Annual Report

China Great Wall Asset Management Co. Ltd. experienced significant financial challenges in 2022, posting net losses of over 45.3 billion yuan ($6.7 billion). This loss marked a substantial increase from the previous year’s loss of 8.6 billion yuan [para. 1][para. 2]. The poor performance was attributed to China’s economic slowdown, recurrent COVID-19 outbreaks, and a crisis in the real estate debt sector [para. 2].

Despite the severe financial strain in 2022, Great Wall showed signs of recovery in 2023 and the first quarter of 2024, reporting net profits of 1.6 billion yuan for 2023 and 1.1 billion yuan for the first quarter of this year [para. 3]. Comparatively, Great Wall's 2022 net loss surpassed that of China Huarong Asset Management Co. Ltd., another major state-owned bad-debt manager, which reported a net loss of 27.6 billion yuan for the same period [para. 4]. However, the other two members of China's "Big Four" state-owned bad-debt managers reported net profits in that year [para. 4].

China established the four asset management companies (AMCs) — China Great Wall Asset Management Co. Ltd., China Huarong Asset Management Co. Ltd., China Cinda Asset Management Co. Ltd., and China Orient Asset Management Co. Ltd. — in the late 1990s. These entities were created to absorb approximately 1.4 trillion yuan of non-performing loans from China's four major state-owned banks, which were on the brink of insolvency following the Asian Financial Crisis due to extensive imprudent government-directed lending to state-backed companies [para. 5].

Over time, the AMCs evolved into multifaceted financial conglomerates, engaging in various sectors such as banking, insurance, securities, trust, and financial leasing [para. 6]. Huarong, under the leadership of former Chairman Lai Xiaomin, accrued significant debt through extensive domestic and international investments. However, Lai's involvement in corruption led to his execution following a probe in 2018. In response, Huarong underwent a state-led restructuring effort led by Citic Group Corp. in 2021 [para. 7].

Recent years have seen the remaining bad-debt managers also focusing on shedding non-core assets to concentrate on their principal activity of buying and restructuring distressed debt to recoup funds [para. 8]. This reorganization phase adversely affected the overall profitability of the AMCs. Specifically, Great Wall postponed its 2022 annual report release despite having recorded a net profit of 479 million yuan for the initial three quarters of that year. On the other hand, Huarong faced net losses in 2020 and 2022 but rebounded with a net profit of 1.8 billion yuan in 2023 [para. 9].

Insider information revealed that in 2022, Great Wall was anticipated to be the next subject of a government-led bailout, similar to Huarong. China Everbright Group Ltd. had initiated a due diligence process into Great Wall, but the plan was abandoned following the fall of the former Everbright Chairman, Li Xiaopeng [para. 10].