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China Huarong warns of US$4 billion loss for 2022, as volatile capital markets hammer bad-loan manager’s business

  • Company cites capital-market volatility and slumping property market as reasons for the loss
  • China’s Ministry of Finance fined the company 100,000 yuan on Friday for poor risk controls and ‘severely distorted’ accounting data

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The logo of China Huarong Asset Management is seen at its office in Beijing on April 16, 2021. Photo: Reuters
Elise Makin Beijing

China Huarong Asset Management expects to post a net loss of 27.6 billion yuan (US$4 billion) for 2022, two years after a record loss prompted the Chinese government to bail out the group.

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The bad-loan manager said capital-market volatility eroded the fair values of certain equity financial assets, resulting in “significant unrealised losses”. It also said that a slump in the property market forced it to set aside money for losses in the value of its assets.

The profit warning, in a filing with the Hong Kong stock exchange on Sunday, came after Huarong said on Friday it was fined 100,000 yuan by China’s Ministry of Finance, which found the company’s internal risk controls ineffective and its accounting data “severely distorted”. Seven Huarong subsidiaries also received fines of the same amount.

Shares in Huarong fell by 3.5 per cent to HK$0.42 in Hong Kong on Monday.

A visitor walks past a booth from accounting firm Deloitte at the China International Fair for Trade in Services (CIFTIS) in Beijing on September 5, 2020. The Beijing office of Deloitte Touche Tohmatsu has been fined US$30.8 million for failing to adequately audit China Huarong Asset Management, the Ministry of Finance announced on Friday. Photo: AP
A visitor walks past a booth from accounting firm Deloitte at the China International Fair for Trade in Services (CIFTIS) in Beijing on September 5, 2020. The Beijing office of Deloitte Touche Tohmatsu has been fined US$30.8 million for failing to adequately audit China Huarong Asset Management, the Ministry of Finance announced on Friday. Photo: AP

Focusing on distressed asset management, the company is one of China’s four large bad-loan managers, along with Cinda, China Great Wall Asset Management and China Orient Asset Management.

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China Huarong said it scaled back its business as defaults among property developers ballooned. Ensuing restructuring of their debts prompted investors to book losses, it added.

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