Chinese Sovereign Fund Takes Over Third Major State Asset Manager

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Nearly seven months after the official announcement, China’s Ministry of Finance has completed the transfer of ownership for the country’s three largest state-owned bad debt management companies to a subsidiary of its sovereign wealth fund.

The Ministry of Finance transferred its entire 58 percent stake in China Cinda Asset Management to a major state-owned investment company, as announced on September 4. Similarly, the stakes in China Orient Asset Management and China Great Wall Asset Management—holding 71.6 percent and 73.5 percent respectively—were transferred to the same entity in April and June.

Reports from last January indicated that China planned to consolidate three of its four “bad banks” into the national wealth fund soon. The remaining bank, China Huarong Asset Management, rebranded as China Citic Financial Asset Management after becoming a subsidiary of the state-owned conglomerate Citic Group.

This transfer is part of a broader reform of China’s financial institutions aimed at clarifying regulatory roles of state-owned shareholders while minimizing disruptions to their operations, according to industry sources.

A reform plan unveiled by China’s State Council in March 2023 outlined the government’s goal to divest from market-oriented institutions owned by government agencies and shift financial assets to specialized state-owned financial capital management entities.

The four bad debt managers, established in 1999 to handle non-performing loans from major state banks—including the Agricultural Bank of China, Bank of China, China Construction Bank, and Industrial and Commercial Bank of China—have since evolved into financial holding companies with multiple licenses.

Founded in 2007, the sovereign wealth fund is among the world’s largest, tasked with managing China’s foreign exchange reserves within acceptable risk levels. It is directly overseen by the State Council.

The investment company primarily focuses on key state-owned financial institutions, exercising shareholder rights and responsibilities on their behalf. As of mid-2022, it directly held stakes in 19 financial organizations spanning banks, insurance companies, securities firms, and integrated financial service providers.