——on the 15th Anniversary of COAMC
Time flies. We celebrated the 15th anniversary of COAMC in this golden autumn. 15 years are just like a drop in the ocean compared with the long history of China, but since its inception on October 15th, 1999, COAMC has experienced 15 years of extraordinary achievements.
After 15 years of hardship and great difficulties, COAMC has carried out its mission and over-fulfill the government’s plan of policy NPA disposal & recovery. Many state-owned companies were reborn thanks to COAMC’s support in different forms such as debt-to-equity swap. Entrusted risky financial institutions have been doing well. And COAMC played its role successfully in guarding against and reducing financial risks, facilitating the reform of state-owned enterprises and preserving the value of state assets.
During the 15 years of self-improvement, COAMC has been innovating in order to survive in the market. The market-oriented transformation has been stepped up, which means broader business scope for NPA disposal, innovative models for NPA management, and gaining advantages in the market by using preferential policies. Our core businesses are enjoying sound development and the corporation is making substantial progress.
Preparing for danger in times of safety, COAMC experienced 15 years of business diversification. Still focusing on NPA management and financial risk disposal, COAMC now has business platform subsidiaries for insurance, securities, trust and financial leasing etc. We have also made our mark in micro-finance and venture investment. The diversified businesses constitute a solid foundation for our sustainable development.
The experience we got during the 15 years made us aware of the importance of looking into the future and observing the trend and situation. Required by the our superior and with a thorough understanding of our own characteristics with a research into the international best practices, COAMC decided to rely on asset management and insurance as its two engines for future development. Focusing on the expansion of insurance business, COAMC is now exploring new forms of asset management in order to provide comprehensive and one-stop financial services to our clients.
The sunshine and glory come only after the storms. After 15 years of hard work, COAMC has achieved leapfrog development. The pre-provision profit of COAMC exceeded 10 billion yuan and reached 11 billion in 2013, an increase of 80% compared with the previous year. By the end of June 2014, the total asset of COAMC reached 294.7 billion yuan, with its net asset reaching 48.2 billion yuan, of which 39.3 billion yuan went to the parent company. Compared with the registered capital of 10 billion yuan when the corporation was established, the state asset owned by COAMC has seen a significant raise in its value. The whole corporation has been pressing ahead on all fronts.
With sweat and tears, we have achieved a lot and overcome huge difficulties. COAMC never quits in front of crisis. Setbacks and failures can never beat us. They just make us stronger and more determined to fight harder until we win. Every storm that we weathered though, every achievement we made, and every step we climbed pushed us to achieve something even bigger. We never stop. We never slack off. We are never “good enough”.
All of these are accompanied by tears and cheers. Glory and sadness always come hand in hand.
All of these carry our glory and dream, offering endless sources of spiritual power.
All of these belong to every employee of COAMC.
We honor our duty and carry out our mission.
The 1997 Asian financial crisis raised the alarm for China’s banking system. In order to stabilize the financial system and deal with the massive NPA in the state-owned commercial banks, the State Council decided to establish asset management companies to purchase, manage and dispose of NPA from state-owned banks. The mission of reducing financial risks, supporting the reform of state-owned companies and preserving the value of state assets fell on the shoulder of AMCs.
COAMC was officially registered and established on October 15th ,1999. The long journey of NPA disposal was initiated.
In its fledgling years, COAMC acquired policy NPA from Bank of China with a total amount of 277.313 billion yuan which involved more than 20,000 companies and over 70,000 deals. COAMC was under huge pressure posed by the gigantic amount of NPA business because of the shortage of manpower, limited time, lack of experience, and sophisticated work such as acquisition, liquidation and valuation. But we stayed calm and faced up to the difficulties. Some branches even didn’t have their own offices at that time. The preparatory committee members worked very hard in the rented residences, crossing the river by feeling the stones, and made unprecedented achievements in this unprecedented undertaking in the history of China’s financial system.
There were three biggest obstacles when the company was just established. Firstly, NPA disposal was a new financial service at the time, so crossing the river by feeling the stones resembled our job very well because we had no examples to follow. Second, the legal framework and credit system were far from complete, which posed significant challenges to our business. Third, NPA in China were very complicated. Economic factors, systematic flaws, and human factors all contributed to the complexity of China’s NPA, which determined that our road could be very bumpy.
COAMC’s situation at that time was even more difficult because the NPA it bought contained a lot of assets related to foreign trade. Foreign exchange assets, non-performing loans, unsecured and unguaranteed loans took a large part of its portfolios. One third of the NPA was resulted from failed foreign trade deals. Those foreign trade companies had already become empty shells.
However, we didn’t flinch. We took the challenges head on. The employees of COAMC devoted themselves into their work with a strong willpower, a tough mind and a sense of responsibility.
It will never be forgotten that our employees kept traveling across the country to get the first-hand knowledge of the NPA projects. They carried out due diligence for all the companies involved in the NPA projects, inspected the production situation on the spot, and established standardized data bases. When they first arrived in a city to deal with a new NPA project, they encountered a lot of difficulties because they were completely strangers. And the traveling just made their job even more exhausting.
We will always remember that our employees gave up their spare time, stayed up late till mid-night and talked to the debt companies until very late in order to come up with a better solution for asset disposal. When the SARS epidemic spread wildly across the country, many negotiations were still going on without any interruption. The disposal of one NPA project could take months or even years.
On the tenth day after COAMC was established, we signed the debt-to-equity swap agreement with Jiangxi Phoenix Optical Instrument (Group) Limited. The debt to asset ratio of that company was reduced from 69% to 41%. Every year it spent 7 million yuan less, which helped them to get out of trouble as soon as possible. This deal was a good start for COAMC in its debt-to-equity swap transactions.
It won’t be forgotten that we sent over 100 professionals within one day to Fujian province to take over Minfa Securities after CSRC entrusted us with this company. After getting the technical training in Fujian, the team members went to the 29 brokerage offices of Minfa around the country, just in time to handle the complicated and dangerous situation, thus playing a constructive role in stabilizing the financial sector and the whole society.
Every exhausting business trip, every hard negotiation, and every sleepless night are speaking for the persistence and sense of responsibility of our employees. In every NPA project, we all work hard with full stamina, show extreme endurance and test our limits. For every entrusted financial institutions, we all do everything we can to save them with a sense of mission and responsibility.
With 15 years of endeavor, our expectation have been turned into achievements. By the end of 2006, COAMC over-fulfilled the tasks assigned by the Ministry of Finance by 1.6% ahead of schedule in the cash recovery of the 277.3 billion yuan policy NPA portfolios. We went on to acquire more NPAs in order to help reduce the loss of state assets.
There is a duty, so we persist; there is a mission, so our lives shine. COAMC has disposed of policy and commercial NPA with a total amount of nearly 1 trillion yuan in the past 15 years. Tasks including policy NPA disposal, entrusted disposal of BOC loss assets, debt-to-equity swap, and handling entrusted financial institutions have all been completed very well. COAMC has experimented with different approaches to reducing financial risks, preserving state assets and facilitating the reform of state-owned companies. It has made great contribution to the social stability, optimal allocation of resources, the formation of NPA markets and the building of the credit system in China. We have gained a lot of experience in NPA disposal and a professional staff team has been made up. COAMC is now more market-oriented with an improved governance system, a sound internal control system, and its unique advantages as a financial service provider.
It has been proven that AMCs have become an integral part of China’s financial system as important tools to guard against and dissolve financial risks, and hedge against the cyclical risks posed by the fluctuations of China’s economy. They will play an even bigger role in the financial market.
Innovation, survival, and self-improvement
COAMC was born during the financial crisis and it is developing with crisis lurking around. In 1999, the Ministry of Finance said that the AMCs would only exist for 10 years when the AMCs were established. During these years, our employees have been living with anxiety about what we were gonna do 10 years later.
In 2006, COAMC completed the tasks for NPA disposal assigned by the Ministry of Finance. We didn’t have many assets left to dispose of then. The state-owned commercial banks gradually improved their management through restructuring. There were not that many NPAs for us to purchase. There was no need for any large scale NPA transfer anymore. So there was a hot debate about the future of AMCs. Some employees had no idea where COAMC was heading for.
How could we survive the doomsday in the 10th year? This was a huge question that became more and more urgent as time went by.
What could we do? The answer was “innovation” plus “transformation”.
Actually, we had already tried some innovative approaches for NPA disposal and asset management during the period of NPA transfer from state-owned banks.
In 2001, COAMC sold a NPA portfolio to overseas investors with a total amount of 1.8 billion yuan, setting the first example for Chinese AMCs working together with overseas investors in NPA disposal. In 2003, COAMC carried out restructuring for Mudanjiang Orient Pharmaceutical Co.,Ltd. and re-registered that company as Mudanjiang Yude Pharmaceutical Co.,Ltd., dealing with NPA through investment banking approach. In 2004, COAMC reinvested in the construction of Ruifeng Tower which was a mortgaged asset. As a typical reinvestment in mortgaged asset, this deal was a complete success. Since 2005, three hierarchical trust projects in Guangzhou, Beijing, Tianjin, Hebei, and Wuhan have been set up, which is another example showing that COAMC is experimenting with new approaches for NPA disposal. In 2006, COAMC co-invested with a foreign investor to establish Shunwei Asset Management Company for asset disposal. In the same year, COAMC issued the “Dongyuan-1 Asset-backed Securities”, the first NPA securitization project in China. All these experiments have helped us to find new ideas and new approaches with very good economic returns.
Innovation is the blood for our business. Living with crisis, AMCs have no choice but to keep innovating if they want to grab a chance of survival. As a trailblazer, COAMC has to fight its way through with innovation.
In 2007, considering the current situation and future trends, COAMC made its decision on the principles for transformation, market position, core businesses and future direction. It started to separate the policy NPA and commercial NPA in the book. The market-oriented transformation was initiated with innovation stepped up in management, institutional building and business expansion.
Our NPA business targets has been expanded from NPA in the banking sector, to non-banking NPA and non-financial NPA in recent years. We are now dealing with both spot and forward NPA transactions. We have a bigger stage to play. COAMC proposes the idea of “rebuild and reborn” for NPA management. Traditionally, we mainly dispose of bulky NPA portfolios, but now our business has included restructuring for problematic projects, troubled business and risky financial institutions.We put emphasis on value-added intensive management while avoiding simple disposal. NPA disposal is not only about “portfolio transfer, discount, and litigation”. Asset securitization, hierarchical trust, structured transaction, asset restructuring and IPO are the new approaches we introduced for NPA disposal. As an important engine and a pillar for our sustainable growth, innovation made it possible for us to continue to grow fast.The compounded growth rate of COAMC’s pre-provision profit between 2010 and 2013 reached 87.53%. The annual profit exceeded 10 billion yuan in 2013.
Diversification offers another strong push for our transformation. COMAC established Dongxing Securities and Foreign Trade and Financial Leasing Company in recent years through trusteeship and restructuring of crisis-hit financial institutions. In 2011, CBRC approved our proposal to re-register our subsidiary Guangzhou Science and Technology Trust Investment Company as “Daye Trust Co.,Ltd.”. In the second half of 2012, COAMC acquired China United Insurance as the controlling shareholder with an offer of 7.8 billion yuan. This was the largest M&A in China’s insurance industry, which laid a solid foundation for future diversification of our business. Currently, COAMC has subsidiaries in securities, leasing, trust, insurance, and overseas investment banking. We have got all these licenses and now we can provide financial services mentioned above as well as other services such as credit rating, micro-finance and venture investment. Our overseas business is developing very well. COAMC has become a comprehensive modern financial service group which is on the path of sustainable development. Its subsidiaries are now contributing more and more to the profit of the whole corporation. Their contribution rate has increased from 27% to 42%.
The world is flat in the age of Internet. Resources are allocated at the global level. COAMC International is a financial institution with multiple financial licenses based in Hong Kong. Through business innovation, COAMC International is expanding its business in the global market. In September 2013, COAMC International issued 600 million dollar USD bonds which went public in the Hong Kong Stock Exchange in mid September, making COAMC the first one among the four AMCs to issue USD bonds in the overseas market. The bonds got an “A-” rating from Fitch. On January 15th, 2014, COAMC International issued 2.5 billion yuan 3-year RMB dim sum bonds after the pricing was completed, making COAMC the first one among the four AMCs to issue both USD and RMB bonds in the overseas market. In August, COAMC worked with the Carlyle Group in an investment project in Virginia, USA, which was the first direct investment in the overseas market for COAMC.
COAMC has been trying hard to secure sustainable development through innovation. Innovation and self-improvement led to leapfrog development of our business in recent years. Between 2010 and 2013, the net profit of COAMC exceeded 1 billion yuan, 3 billion yuan and 6 billion yuan. In 2013, the annual net profit reached 11 billion yuan. The total asset increased from 66.6 billion yuan in 2010 to 229.6 billion yuan in 2013, which was a 2.45 times expansion. The net asset increased from 22.3 billion yuan in 2010 to 39.2 billion yuan in 2013, with a compounded growth rate of over 20%. In spite of the challenges posed by the macro-economic situation and sluggish market in the first half of 2014, COAMC maintained a steady growth with a net pre-provision of 7.648 billion yuan, an increase of 39% compared with last year. By the end of this June, the total asset of COAMC reached 294.7 billion yuan while the net asset reached 48.2 billion yuan.
We started from zero 15 years ago. Now we have become much bigger and stronger through innovation and self-improvement, which is the core of our corporate culture, an integral part of our soft power and a treasure for all the employees.
This age is dominated by innovation. Even a business empire could fall without endless innovation. With innovation, even an elephant can be a good dancer (“Who says elephants can’t dance?” written by Louis V. Gerstner, Jr.a former CEO of IBM). Innovation has been instilled into our blood. China’s economy is experiencing profound adjustment with ever increasing national wealth and relaxed financial regulation. We are embracing an age of “big asset management”. With historic opportunities popping up, COAMC is now looking into the future and improving its governance and institutional building with constant innovation. The business models are being upgraded based on strict risk control. Systematic innovation is carried out to follow the trend in the market. We sincerely believe that we could draw a splendid picture for our future business through innovation.
Make our dreams come true by keeping our feet on the ground
Dreams give us power. When Chinese people are cheering for the great “Chinese Dream”of rejuvenation, COAMC is working hard on its path to a “leading whole-value-chain financial service group”.
COAMC has followed certain steps to open up a whole new vistas including exclusive NPA disposal and management in the banking sector, diversified financial business, and coordinated development as a comprehensive financial group.
Now we have 25 branches and 1 business department across the country with 10 subsidiaries including China United Insurance, Dongxing Securities, Daye Trust, Foreign Trade & Leasing, Bangxin Asset Management, Golden Credit Rating, Oriental Bangxin, Bangxin Capital, COAMC International and Dongyin Holding. It has acquired multiple financial licenses,which enables itself to have a wide business scope covering asset management, insurance, trust, financial leasing, investment and financing, and credit rating etc. We are very professional in NPA disposal and asset management. The pro-cyclical and counter-cyclical business models can supplement each other to prevent risks. Four nationwide business networks and 8 million clients constitute a solid foundation for business expansion. An experienced management team and a sound risk control system are our trump cards for future success.
In 2013, COAMC proposed the idea of relying on asset management and insurance as its two engines. Focusing on insurance and drawing upon the experience it got from NPA management, COAMC is well positioned to explore different kinds of asset management businesses and provide comprehensive financial services for both individual and institutional clients at different stages of the business life-cycle. We are happy to see that insurance and asset management can supplement each other very well since the insurance fund requires proper management while asset management needs capital as a prerequisite. Thus cross-selling could be boosted and our products can be diversified. The brands of different business can reinforce each other, bringing stable income and steady growth for COAMC through a synergy between the most successful firms in different fields.
The “two-engine” strategy is consistent with the regulatory authority’s principle of differentiated strategies for different AMCs. COAMC has found its niche in the financial market by combining the international best practice and local experience. This strategy reflects our understanding and expectation for the future market situation.
Insurance and asset management markets have offered rare opportunities and huge space for future business expansion. On August 18th, the State Council released “the Opinions on Faster Development for Modern Insurance Industry” which drew an overall picture for the development of the insurance industry based on the past experience and contemporary situation. The goals of the whole industry have been made clear and unprecedented opportunities have been offered thanks to this document. Since 2012, the financial regulatory regime has been reformed to break the boundaries between banks, insurance companies, securities companies, trust companies and fund companies. The vitality of different players have been unleashed. An age of “big asset management” is coming with more competition, more intensified innovation and cross-industry expansion. Huge potential is there in both asset management and insurance markets.
The future growth of COAMC will be dominated by asset management and insurance, supported by the coordinated development of other financial businesses and supplemented by the interaction among three main business sectors. As a comprehensive financial group with diversified services, COAMC is capable of providing dynamic services to meet clients’ needs at different stages in their business life-cycle. It constitutes our core competitiveness and unique advantage, like a “moat” that consolidates our position in the market.
One needs to keep his feet on the ground to make his dream come true. COAMC and its subsidiaries are just like a huge fleet, raising the sails and setting off for its splendid voyage with a sound mechanism for coordination and an initial framework for corporate governance. The shareholding reform will be carried out in the foreseeable future. A modern corporate system will be put in place to complete the transformation from a policy financial institution to a commercialized financial corporation. We are planning on introducing strategic investors, after which an IPO for the whole corporation will be initiated at the right time. Then COAMC will become even more powerful, the main businesses will be boosted, the core competitiveness and brands will be enhanced. A clear picture for a better COAMC will be in sight.
Responsibility, mission, innovation, self-improvement, dream and practice are what this 15-year journey is all about. Every peak that we reached and every hurdle that we crossed made us realize that there is much more to be done to take the glorious duty and handle the daunting challenges. But in the meantime, we also experienced joy and happiness from success and harvest.
Storms make us tougher and a long journey starts after the mountain pass. COAMC is now 15 years old. Like a young man in his puberty, COAMC will encounter many unprecedented opportunities and challenges lying ahead. No matter what, there will always be a strong push to make us keep marching forward. There will always be a voice calling upon us to keep fighting. There will always be a kind of spirit that makes us never say “I quit”.
“May the strong wind carry my ship to break the waves. I will raise my sail to bridge the vast ocean.” The third plenum of the 18th CPC Central Committee announced the beginning of a new era for China’s reform. COAMC was born in response to the need of reform. Reform makes us stronger. Living in this great age, COAMC has a promising future. We believe that the “two-engine” strategy will bring us to a new height and our dream of building a “leading whole-value-chain financial service group” will come true, serving the real economy in a better way and benefiting the whole public through prosperity of the financial industry.
