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The global investment bank Goldman Sachs and China's largest State-owned commercial bank have agreed to set up a joint venture to handle part of the Industrial and Commercial Bank of China's non-performing assets.
Goldman Sachs said a memorandum of understanding was signed yesterday with the Chinese bank to forge a strategic partnership. A key element was the establishment of a joint venture to deal with between 8 billion and 10 billion yuan (US$963 million to US$1.2 billion) of non-performing assets.
Under the memorandum, a joint-venture servicing company will also be set up. Goldman Sachs has agreed to bring the best international practices in asset management to the Chinese bank.
Henry M. Paulson, chairman and chief executive of the Goldman Sachs Group, said: "It's a very significant joint venture because it's the first joint venture that's directly done with a bank."
Foreign investors, including Goldman Sachs, have already set up two joint ventures with authority to deal with China's massive non-performing loans. The ventures are both with the China Huarong Asset Management Company, one of the four asset-management companies created in 2000 to take over 1.4 trillion yuan (US$168 billion) of bad loans from State-owned commercial banks.
Speaking in Beijing, Paulson said details of the joint venture - such as the registered capital, ownership structure and bad-loan disposal methods - were still undecided. "We will work them out in the next couple of months," he said.
Goldman Sachs executives implied that they were optimistic that the latest joint venture would be approved more quickly than was the case with its joint venture with Huarong, which spent one year going through red tape. They cited remarks made last week by China Banking Regulatory Commission Chairman Liu Mingkang about accelerating the disposal of bad loans at State-owned commercial banks.
Fred Hu, managing director of Goldman Sachs (Asia), said: "So it (the government) is very supportive."
Paulson met local business leaders and senior government officials on his two-day visit to China. He said he was happy about the way the Chinese Government has handled the SARS crisis and said he felt safe in Beijing, where the number of new SARS cases is falling sharply. "I feel very safe personally to be here," he said.
(China Daily June 5, 2003)
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