China's official Xinhua News Agency has deleted a report saying that Beijing plans to "merge" three of its biggest bad debt managers into China Investment Corporation.
The short report published on Sunday stated that China Cinda Asset Management, China Orient Asset Management and China Great Wall Asset Management would be "merged" into the country's US$1.24 trillion (HK$9.67 trillion) sovereign wealth fund.
The move would be part of China's plan to reform institutions, according to Xinhua Finance News reported on its website, citing unidentified industry insiders.
But as of yesterday afternoon, the report was no longer accessible on its website.
Bloomberg News reported in May last year that China was considering transferring the state's stakes in the three bad debt managers to Central Huijin Investment, a unit of CIC.
The Ministry of Finance holds a controlling stake in the three, with 58 percent in Cinda, 71.6 percent in Orient and 73.5 percent in Great Wall, according to their latest available annual reports.
CIC and the ministry didn't immediately reply to requests for comment.
While the move would allow Beijing to separate the government's roles as a regulator and shareholder in order to better focus on curbing risks, the transfers could raise questions over the strength of direct government support. Concerns over reduced government support for the asset management companies or AMCs had just led to a downgrade by Fitch Ratings earlier this month.
Katie Chen, a senior director at Fitch, said the AMCs' current ownership structure and lengthy government approval processes could adversely affect the timeliness of required support or resolution.
"Any change of ownership structure that streamlines the capital support process and improves timeliness could be positive to the AMCs' ratings, if they prove effective," said Chen. "We believe the Chinese government is, and will continue to be the ultimate support provider to the AMCs in the event of need."
The report gave a brief lift to the firms' bonds and shares yesterday. Cinda's shares jumped as much as 7.8 percent, before paring gains to close 2.6 percent higher in Hong Kong.
Central Huijin has long been the primary vehicle for holding the state's stake in many of the country's largest financial institutions. It has direct ownership in 19 financial institutions as of end-June, according to its website.
The Ministry of Finance has controlling stakes in the three big AMCs. Reuters
