China's asset management companies eschew investment in banks' mounting bad debt

Over 20 Chinese banks sold more than RMB120 billion in bad debt to state-run asset management companies (AMCs) in 2014, more than doubling the amount seen the year prior even as AMCs looked increasingly elsewhere for profit, South China Morning Post reported, citing figures from accountancy KPMG. Chinese banks were unprepared for the high volume of bad loans and are increasingly reluctant to sell off bad assets at low prices; in the first 11 months of the year the official sector-wide non-performing loan ratio hit 1.31%, though BNP Paribas put the implied ratio at 7.1% for 2014. Meanwhile, AMCs can now snatch up a variety of easier, higher-return businesses that don’t include sticky restructuring or liquidation.