China’s Great Wall AMC Wipes Out Billions in Losses, Consolidates Under State Giant

Four months after China’s Ministry of Finance ceded its controlling interest in China Great Wall Asset Management Co. Ltd. (Great Wall) to Central Huijin Investment Ltd., the bad-debt manager has enacted a comprehensive capital and ownership overhaul to reinforce its weakened financial position. This move aligns with regulatory approval and addresses the long-standing accumulation of non-performing assets that have beleaguered the company[para. 1].

The restructuring comprises a two-step process. Initially, Great Wall’s shareholders reduced the company’s registered capital from 51.2 billion yuan ($7.14 billion) to 10 billion yuan. This substantial reduction allowed the company to absorb and write off past losses. Subsequently, Central Huijin injected 36.8 billion yuan, resulting in a new registered capital of 46.8 billion yuan. This recapitalization is viewed as a clean financial slate for Great Wall, which faced years of mounting bad debt[para. 2].

Following these changes, there was a significant shift in the company’s ownership structure. Central Huijin’s stake rose to 94.34%, a substantial increase from 73.53%, making it the clear majority shareholder. The National Council for Social Security Fund became the next largest shareholder with 4.05%. Minor remaining stakes are held by China Property & Casualty Reinsurance Co. Ltd., China Continent Property & Casualty Insurance Co. Ltd., and China Life Co. Ltd.[para. 3]. Great Wall has confirmed the completion of shareholder register and business license updates, with the revised capital fully paid in, indicating the conclusion of this restructuring process[para. 4].

The capital reduction was not merely an accounting maneuver; analysts assert that the main purpose was to cleanse the balance sheet of accumulated losses before recapitalization. This improved asset quality and enhanced stability, which was crucial for the struggling institution[para. 5]. The origins of Great Wall and other asset management companies (AMCs) date back to the late 1990s. The government established four AMCs, including Great Wall, to take on approximately 1.4 trillion yuan of bad loans from China’s major state-owned banks that were teetering after the Asian Financial Crisis[para. 6]. Great Wall, in particular, managed bad assets from Agricultural Bank of China and subsequently faced operational headwinds due to weak asset quality and economic difficulties, particularly in the property sector[para. 7].

Great Wall’s financial issues became public when its 2022 annual report was delayed and eventually revealed a significant 45.3-billion-yuan loss for 2022 and an 8.56-billion-yuan loss in 2021. The cumulative losses of 53.8 billion yuan surprised the market[para. 8]. The company attributed these challenges to the broader economic slump, Covid-19 outbreaks, and the ongoing property debt crisis. However, Great Wall reported modest profits of 1.55 billion yuan each in 2023 and early 2024, reflecting slight but positive momentum[para. 9].

Importantly, Great Wall’s capital reduction under the revised Company Law, effective July 1, 2024, made it a notable precedent, as the new law permits companies to reduce registered capital to offset residual losses after exhausting reserves, provided no payouts are made to shareholders during the process[para. 10].

This restructuring aligns with the 2023 institutional reform, consolidating AMC oversight under Central Huijin, a subsidiary of China Investment Corporation (CIC). The reform aimed to resolve the conflict of interest that arose when regulators also acted as company owners, thus enhancing accountability and asset management efficiency[para. 11][para. 12][para. 13].

Concurrently, Great Wall is divesting non-core assets, exemplified by the sale of its 40.92% stake in Great Wall Huaxi Bank for 4.33 billion yuan. This transaction, approved by the Ministry of Finance, follows a series of asset sales intended to refocus on distressed debt management[para. 14][para. 15][para. 16]. Despite exiting several businesses, Great Wall has acquired over 3% of China Minsheng Bank, seeking a board seat and stable dividends, which are seen as crucial in a challenging banking landscape with tightening margins[para. 17].