Interviewing Zhang Zi’ai, President of COAMC

By Du Jin from Financial Times
 　　
Since the 18th CPC National Congress, General Secretary Xi Jinping has made a series of important remarks, putting forward many new concepts, views, judgments, and requirements that are of great realistic and historic significance to the development of the nation and the Party, and to breaking new grounds in building socialism with Chinese characteristics. After years of exploration and practice, Chinese asset management companies have made great progress in commercial transformation and have established a sustainable and steady business model. In the new economic dynamic, how do AMCs deepen their reforms, and accelerate their transformations under the guidance of General Secretary Xi’s speeches? It was with these questions that this paper’s journalist interviewed Mr. Zhang Zi’ai, President of China Orient Asset Management Corporation.

Journalist: General Secretary Xi has pointed out the direction for the reform of the financial industry, and the focus of the reform in his speeches, which will bring great opportunities to the industry. Based on the specific development of COAMC, what are your views on this issue?

Zhang Zi’ai: COAMC has persisted in the dual focus of business development and political education, and has prioritized the studying of Secretary Xi’s speeches and the key messages of the 18th CPC National Congress as an important political task. Since this year, management and staff of COAMC Group have comprehensively studied the messages of General Secretary Xi’s speeches, and kept improving their ideological awareness and sense of responsibility. Furthermore they persisted in upgrading their theoretical and professional ability. Management members of all levels must act according to the requirements of CPC and adhere to the “San yan san shi” Principles (being disciplined and pragmatic in three aspects).

COAMC will meet the requirements the 18th CPC National Congress put forward for the reform of financial sector and state-owned enterprises, hold on to our ideals and faiths, strengthen our sense of responsibility, and push forward the company’s sustainable development. We will implement the key messages and incorporate them in COAMC’s corporate culture; we will enhance the awareness and determination of reform and innovation, and put efforts into the practice of COAMC’s restructuring. Moreover, we will make progress in transforming our business models, in promoting sustainable development, in improving performance and ability to make profits; we will keep acting as a financial “stabilizer” and “safety net”, better serve the real economy and support China’s economic restructuring and industry upgrading.

Journalist: Knowing the difficulties and focus of the current financial reform, based on COAMC’s realities, what are your new thoughts for promoting AMC reform and transformation?

Zhang Zi’ai: After years of exploration and practice, Chinese AMCs have made great progress in commercial transformation, and have established a steady and sustainable business model. At present, COAMC holds licenses for businesses such as insurance, securities, trust, leasing and investment banking in Hong Kong; we have obtained investment and management abilities in various sectors, covering every stage of macro-economy and corporate life cycle. Additionally, we have the advantages of on-shore and off-shore markets, different currencies and cross-border asset management services. Due to the fact that asset management business which requires fundraising and insurance business which requires capital operation have a mutual basis of synergy and involve the entire business process of asset management, we at COAMC have established a dual sustainable business model of “asset management +insurance”.

Currently, China’s economy is growing at medium speed. With the residents’ wealth growing, interest rates being more market-oriented, economic structure being upgraded, asset management companies have great market opportunities to accelerate commercial transformation. However, regulations and understanding of asset management industry still has many uncertainties, policy support from regulatory departments is crucial, before real transformation can be realized.

At the same time, company’s internal performance needs to be elevated as well. From COAMC’s experience, we need to put more efforts into transforming operational concepts, improving investment and management ability, cultivating clients and building networks, developing synergy, adjusting organizational structure, and nurturing corporate culture.

Journalist: COAMC has had excellent performance in the first half of this year, even though macro economy is slowing down and market remains bearish. With the company’s restructuring in its most critical stage, what are COAMC’s plans in the coming future?

Zhang Zi’ai: In the first half of this year, COAMC remained steady growth in business performance. COAMC Group obtained a total of RMB7.648 billion pre-provision net profit, up by 39% year on year. By the end of June, COAMC Group had expanded its asset to RMB294.7 billion, in which 39.267 billion is attributable to the parent company.

To achieve long-term development, AMCs must foster their core competitiveness, build their own brand and develop their comparative advantages and realize synergetic value. This demands a clear strategic positioning, a scientific and effective corporate governance system, a regulatory mechanism and an assessment system. Meanwhile AMCs must vigorously promote a comprehensive risk management and information system so as to control corporate risks, act compliantly and raise asset quality.

COAMC’s most pressing challenge is corporate restructuring and building a modern corporate system. We need to establish the “San hui yi ceng” mechanism (“three institutions”: stockholders’ meeting, Board of Directors and Supervisory Board; and “one level”: senior management level) and set up a governing mechanism that matches COAMC as a financial holding group. We hope to get the approval for restructuring at the end of this year, reregister as a modern financial holding group by June next year, and strive to introduce strategic investors the year after next, followed by going public.

In terms of business, COAMC will grasp the special opportunities of growing non-performing assets. First, we will consolidate upstream and downstream resources, adopt different disposition approaches to different assets, strive to add value in the process of disposition, and upgrade our NPL business. Second, we will innovate and broaden our views. With a gradually changing market, potential non-performing assets, restructuring of problematic projects, and relief of troubled enterprises will bring more opportunities of special transactions, mergers and acquisitions to AMCs. We should adopt various financing approaches such as creditor’s rights, stock equity, credit enhancement and mezzanine investment to combine NPL disposition, asset management, restructuring, and M&A business so as to consolidate the resources, innovate in business models and create space for sustainable development.

At present, we are planning to cooperate with China Qianhai Financial Holding Group in the establishment of a special situation investment fund, which will be dedicated to the purchase, M&A and restructuring of NPLs. We hope to seize the investment opportunities of China’s current economic cycle; while guarding against financial risks and maintaining stability, we strive to give back to investors in the long term.

Also, we need to hold on to the opportunity of mixed-ownership reform of state owned enterprises, and the opportunity of investment and financing services brought by economic structural adjustment and industry upgrading, which will steer our business into a high-end and high value-added direction. At the same time, COAMC will benefit from the synergetic effect of the Group, and pursue a sustainable development mode.