China Spins a Trade-Deal Trap in Bad Debt Market
The risks are clear and the rewards aren’t for U.S. investors tempted by an opening in distressed assets.
Sometimes, you have to look down.
Photographer: Liu Xin/China News Service/Visual China Group/Getty
China is opening the deepest, darkest corner of its strained financial system to American financial institutions. It’s not clear why investors would want to go there, even with their eyes wide open.
As part of President Donald Trump’s phase one trade deal, China will allow U.S. institutions to apply for asset management company licenses (beginning with the provinces), permitting them to acquire non-performing loans directly from Chinese banks. Previously, foreign investors could only operate in the secondary market to buy portfolios of four or more loans from Chinese asset management companies.