To effectively revitalize social existing assets and enhance asset value, banks have been actively participating in special asset promotion meetings this year. At the same time, regulatory authorities are also accelerating the disposal of special assets.
Recently, Wang Weijun, Secretary-General of the Shanghai International Economic and Trade Arbitration Commission, pointed out at the Special Asset Management Forum of the "Global Asset Management Center Shanghai International Activity Week 2024" hosted by the Shanghai Asset Management Association, that due to the high-risk characteristics of the subject matter of special assets, finding a fast, efficient, and precise way to resolve disputes in the dispute resolution process is crucial for enhancing investors' investment confidence and the enthusiasm for professional services of managers.
In interviews with journalists, it was learned that the difficulties faced in the disposal of special assets include long disposal cycles, valuation difficulties, and low market acceptance.
Building an Ecosystem for Special Asset Disposal
The special asset management industry is an industry that manages and disposes of non-standardized, high-risk, and low-liquidity assets, including non-performing loans, default bonds, bankrupt enterprise assets, non-performing real estate, collateral, etc.
Banks are actively involved. In August this year, Ping An Bank held the "2024 Special Asset Promotion Meeting". It is reported that Ping An Bank's special asset management has specially created the "Special Capital e" collection and disposal cloud platform, continuously upgrading the application of big data technology and full-cycle online asset management and other digital and information tools to empower the entire process of collection and disposal.
In July, the Beijing Branch of Huaxia Bank, in conjunction with the Beijing Property Exchange, held a special asset promotion meeting. The Beijing Branch, Tianjin Branch, Shijiazhuang Branch, Dalian Branch, Qingdao Branch, Nanjing Branch, Shenzhen Branch, and Credit Card Center of Huaxia Bank jointly promoted more than 16 billion yuan of special assets planned for disposal.
At the same time, regulatory authorities are also exploring models for disposing of special assets. For example, Guangzhou has launched the Greater Bay Area Special Asset Empowerment Service Platform, aiming to provide a "online + offline", full-link, full-cycle, market-oriented, and professional integrated solution for all types of special opportunity assets.
Zeng Gang, Deputy Director of the National Financial and Development Laboratory, said that under the influence of changes in the external environment and policy promotion, the development of China's special asset market is entering a mature stage, and the ecosystem of the special asset industry and related supporting infrastructure are also continuously improving. The development of the special asset industry and the improvement of risk disposal efficiency have also provided better support for China to cope with and resolve economic and financial risks, revitalize existing assets, and improve resource allocation efficiency.
"The scale of the special asset market has broken through trillion yuan, and the market potential is huge, providing a larger development space for investors," said Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance. He believes that the opportunities faced by the disposal of special assets lie in the fact that under the pressure of economic downturn, the risk assets of banks and non-bank financial institutions are accelerating exposure, providing a larger development space for special asset management institutions; the application of new technologies can empower the traditional special asset field and improve disposal efficiency; policy support, such as regulatory authorities encouraging local asset management companies to carry out the acquisition of non-performing assets of enterprises in difficulty due to the epidemic.When discussing the characteristics of special assets, lawyer Yin Yukun from GuoHao Law Firm (Shanghai) introduced that, first, special assets are cross-cyclical, with counter-cyclical storage and cyclical disposal. Through a special economic cycle, investors discover, excavate, and repair asset value, selling them during the expected upswing to gain substantial profit returns. Second, there is a considerable premium space for special assets. The holders of special assets have a particularly strong demand for liquidity and often sell at prices lower than the book value and realizable value of the assets to achieve short-term liquidity, opening up a large premium space. Third, the entire process of special assets is fraught with uncertainty. The transaction price is uncertain, as well as the collection process and the outcome of the disposal, including the time, cost, and final returns. Fourth, special assets have high-risk, high-return characteristics. Fifth, there is a high entry barrier and scarcity of licenses. For example, only a portion of AMCs (Asset Management Companies) have licenses to deal with non-performing assets of banks.
There is an urgent need to address the issue of information asymmetry.
The high risk and high return of special assets pose challenges for many financial institutions. Zheng Lei, Chief Economist at Samoyed Cloud Technology Group, believes that the main challenges faced in the disposal of special assets include the difficulty of asset disposal, long disposal cycles, and low market acceptance. However, this also means that in the process of disposing of special assets of distressed enterprises, if the right disposal methods can be found, it is possible to achieve higher returns.
Bai Wenxi believes that the challenges faced in the disposal of special assets include regional fragmentation, information asymmetry, scattered data, and low disposal efficiency. These constraints lead to a need for improved efficiency in resource optimization and allocation. "The special asset industry started late, with changes in market supply structure, increasing the difficulty of disposing of non-performing assets, and increasing the demand for professional talent. Market competition intensifies, and the pressure of risk prevention and control increases, requiring higher professional quality and skills from practitioners."
Zheng Lei introduced that, at present, there are mainly four ways for the market and investment institutions, investors to revitalize the special assets of distressed enterprises: First, seek professional asset disposal institutions. Distressed enterprises can seek professional asset disposal institutions that usually have rich experience and channels to help enterprises find suitable buyers and speed up the speed of asset disposal. Second, leverage online platforms. There are many online platforms that provide asset transaction services. Distressed enterprises can use these platforms to find potential buyers and improve the efficiency and success rate of asset disposal. Third, negotiate restructuring. For some enterprises that still have development potential, new capital and business strategies can be introduced through negotiated restructuring to help enterprises get back on track. Fourth, bankruptcy liquidation. For enterprises that cannot continue to operate, asset liquidation can be used to provide certain financial support for creditors, debtors, and other stakeholders.
Bai Wenxi believes that the next step is to better revitalize the special assets of distressed enterprises, and all parties still need to further improve technical levels, optimize user experience, and respond to increasingly complex regulatory environments; adhere to market-oriented and rule of law principles, continue to promote institutional innovation, and improve the liquidity of special assets; build a good industry ecosystem, promote the efficiency of special asset disposal, and make the effective disposal of stock assets more smooth; strengthen professional capabilities, integrate advantageous resources, cooperate and collaborate, and work with industry and industrial investors to provide relief support for problematic enterprises in new ways; and cultivate professional and compound talents, especially in the fields of finance, law, and technology, to enhance the competitiveness of enterprises.
"It is also necessary to establish and improve the market mechanism. The government and relevant departments should further promote the marketization process and improve the market mechanism for the disposal of special assets, providing more opportunities and convenience for investors and disposal institutions; strengthen information disclosure and transparency, enterprises should strengthen information disclosure, allowing investors and buyers to better understand the asset status and business conditions of enterprises, and improve the efficiency and success rate of asset disposal; optimize the policy environment, the government and relevant departments should provide a more favorable policy environment, encourage investors and disposal institutions to actively participate in the disposal of special assets, and promote market development; strengthen risk control, in the process of disposing of special assets, risk control should be strengthened to avoid losses caused by information asymmetry, fraud and other issues." said Zheng Lei.