I guess this doen't matter much. But it got my attention:
Wednesday October 7, 1:29 am Eastern Time
China investment trust failure sparks alarm
By Michael Kramer
GUANGZHOU, China, Oct 7 (Reuters) - One of the biggest investment trusts in China has been
closed in a move certain to alarm foreign investors and send shock waves through China's
debt-ridden financial system.
Guangdong International Trust and Investment Corp (GITIC), the investment arm of the dynamic
Chinese province of Guangdong, had been closed on Tuesday because of its inability to pay maturing
debt, a central bank official confirmed on Wednesday.
The debts and assets of the sprawling financial and business empire, which is backed by the government of Guangdong, have been placed under
the trusteeship of the Bank of China, one of the nation's big state-run commercial banks.
The last available central bank figures show that at the end of 1996 GITIC had total assets of 21.43 billion yuan ($2.57 billion) and liabilities of
18.67 billion yuan.
Financial analysts said GITIC was unable to repay its short-term debt, estimated at about $500 million. The company was believed to have an
equal amount of long-term debt.
GITIC's collapse, linked to China's tumbling stock and property markets, underlines the severe problems of China's many international trust
companies, which have issued billions of dollars of foreign and domestic debt.
China shut down another big trust company, China Venturetech Investment Corp, as well as a commercial bank in June for failure to pay debts.
It also wound up the China Agribusiness Development Trust and Investment Corp in February after the big trust company was stung by heavy
losses in real estate and stocks.
GITIC has extensive property and securities interests in China and Hong Kong.
The so-called ITICs, or trust and investment companies, played key roles in development in the early days of China's economic reforms begun in
1978.
But they have become less important as the economy opened.
Doubts about government support for the ITICs at a time when China's economy is slowing, and its state-owned enterprises are struggling to
survive, has prompted Moody's Investors Service to downgrade their ratings.
GITIC lost its investment-grade rating in September along with Fujian ITIC and Shanghai ITIC.
GITIC owns a 63-storey luxury hotel and commercial complex in Guangzhou, capital of Guangdong, called GITIC Plaza.
It has prime property in Hong Kong where an affiliate, GITIC Enterprises Ltd , is listed.
Trading in GITIC Enterprises shares was suspended on Wednesday at the company's request pending an announcement, a Hong Kong Stock
Exchange statement said.
The listing in March last year of GITIC Enterprises, which imports and sells construction materials in Hong Kong and China, was a roaring
success at the height of a mania for China-backed companies.
The issue was almost 900 times oversubscribed.
''The People's Bank of China has shut down GITIC because of its inability to repay maturing debt,'' a central bank official in Guangzhou, who
declined to be identified, told Reuters.
He said GITIC was closed ''to protect the rights of debt holders.''
The China Securities newspaper reported on Wednesday that GITIC's securities business, including a mutual fund traded in Shanghai, would be
taken over by Guangfa Securities Co Ltd. Guangfa is based in Guangzhou.
''GITIC's financial claims and debts have been placed under the trusteeship of the Bank of China,'' a Bank of China spokesman told Reuters in
Beijing.
He said GITIC and its creditors would register debts and financial claims with designated branches of the Bank of China. The registration period
would last from October 6 to January 6 next year.
''During that period no debts will be paid,'' the official said.
''The Bank of China is likely to undertake those debts which cannot be recovered,'' he said.
''The Bank of China, after all, is a major state-owned commercial bank. It is also responsible for safeguarding the stability of the state's financial
order,'' he said.
A Guangfa official said a team looking into GITIC's debt, formed by officials from the brokerage, Bank of China and the central bank, moved
into GITIC's headquarters in Guangzhou on Tuesday afternoon.
($1 equals 8.28 yuan) |
