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Wu Yue: give full play to the advantages of financial asset management companies, and work hard to ensure high-quality economic development

The report of the 19th CPC National Congress clearly points out that “China’s economy has shifted from the stage of high-speed growth to the stage of high-quality development”. This important judgment fully reflects the fundamental changes in China’s development conditions and stages, and is regarded as the fundamental basis for determining development ideas, formulating economic policies and implementing macro-control both at present and in the future. To ensure high-quality development, we need to adhere to both new development concepts and the basic principle of “making quality first while prioritizing benefits”, focus on improving the quality of the supply system, and constantly promote the “three major reforms”, namely quality, efficiency and driving force, thus maintaining the sustainable and sound development of economy.

The 2017 Central Economic Work Conference further proposed that we should fight hard to win the three battles respectively against major risks, poverty and pollution, while advancing the eight key tasks. Financial asset management companies, as the main force in resolving the risks regarding non-performing assets, have developed into a veritable all-around “fire brigade” in the financial industry with significant advantages, and are fully capable of playing a greater role in preventing and resolving financial risks, thus continuously strengthening the capacity of finance in serving the real economy and promoting high-quality economic development.

I. Give full play to unique advantages to help win the three battles

(I) Make the most of professional advantages for effective resolution of financial risks

To win the battle against major risks, we need to focus on the prevention and control of financial risks, for which we may make the best of the following significant advantages of financial asset companies.

Perform especially well in the main business of non-performing assets. Financial asset management companies typically develop from the disposal of non-performing assets, which is also their main business, and then they may go further and exploit more values during the operation of the business by means of capital injection for rescue, debt-for-equity swap, divestiture and reorganization, debt restructuring and freezing and custodian operation, while improving the efficiency and benefits as to the disposal of non-performing assets through actively promoting the securitization of non-performing assets, market-oriented debt-for-equity swaps, etc. Financial asset companies typically adopt the mode of comprehensive operation in the form of group, and thus gradually from a market-oriented, diversified and all-around business mode of non-performing assets, enabling different companies to customize suitable business policies in combination with their respective conditions and risk characteristics. Take China Orient Asset Management Co., Ltd. (hereinafter referred to as “China Orient”) as an example: since its establishment in 1999, China Orient has disposed of various non-performing assets amounting to over one trillion yuan in total. In face of new situations, China Orient adheres to the guidance of “making businesses relatively concentrated while highlighting the main business”, further adjusts the structure of business development, and continues to increase the investment in non-performing asset business from such aspects as system formulation, assessment and incentive, task assignment, guidance and training, so as to make it increasingly high the proportion of non-performing asset business in the company’s assets scale, while making full use of its various professional tools to revitalize the stock assets in hope of improving the depth and breadth in its serving the real economy.

Be experienced in rescuing financial institutions. Financial asset management companies actively accept the entrustment of relevant departments or participate in the custody, liquidation or reorganization of some risky financial institutions through market-oriented means. Take China Orient as an example: the company has successfully undertaken the liquidation and closure of Hong Kong and Macau International (Group) Co., Ltd. and the administrative liquidation of MF Securities, Qingtai Trust, Fanya Trust and other high-risk financial institutions, participated in the reorganization of MF Securities, Guangzhou Science and Technology Trust and other institutions, and effectively implemented the risk rescue for China Insurance and Bank of Dalian. Through the custody, liquidation and reorganization of risky financial institutions, China Orient has timely eliminated important risk points in the economic and financial system and effectively prevented the spread and deterioration of risks. After the implementation of risk rescue by China Orient, a number of financial institutions that were once at risk, such as China Insurance, Bank of Dalian, Dongxing Securities and Daye Trust, have walked the way of benign development and become an important pillar for China Orient in its diversified comprehensive operation and also its serving the real economy.

(II) Adhere to targeted poverty relief and make solid progress in poverty alleviation

It is solemnly promised in the report of the 19th CPC National Congress that “poor people and poor areas will enter the moderately prosperous society together with the rest of the country”, and “not a single person will fall behind in the way to the moderately prosperous society”. In response to the call of the central government, we financial asset management companies all bravely shoulder our social responsibilities, do a solid job in targeted poverty alleviation, and contribute to winning the battle against poverty and building a moderately prosperous society in all respects. Take China Orient as an example: In 2017, the company further strengthened the organization, leadership and promotion of poverty alleviation work. All members of the party committee went to poverty alleviation sites for investigation and guidance, and throughout the year, a total of 149 staff in 20 batches went to poverty alleviation sites for investigation, 44 party branches within the organization system paired up with designated villages to help 216 poor households therein, and certain competent cadres were selected and assigned to help poor households get rid of poverty. Besides, China Orient also intensified its efforts to alleviate poverty through a direct investment of over 5 million yuan, the introduction of external funds totaling 1 million yuan, and the supply of donations worth 60,000 yuan. Meanwhile, the company also established and improved a systematic poverty alleviation work mechanism, formulated measures for the management of poverty alleviation funds, and implemented the management of special accounts for poverty alleviation funds to achieve the goal of “special collection, special use, special account and special review”, giving full play to the role of targeted poverty alleviation in supporting local economic construction. In addition, it also formulated measures for distributing funds used to reward rather than subsidizing industries, and actively promoted the development of poverty alleviation projects, while giving full play to the professional advantages of its insurance, securities and other sectors and pooling efforts to explore and establish a sustainable financial poverty alleviation development mode. In the special letters from Shaoyang County of Hunan Province under fixed-point poverty alleviation, China Orient is highly thought of for its performances in the above-mentioned poverty alleviation work, and relevant practices have been included in China Poverty Alleviation and Development Yearbook for two consecutive years.

(III) Develop green finance and win the battle against pollution

The four financial asset management companies have all developed into financial holding companies with banking, securities, insurance, trust, credit rating and other financial licenses, and thus can play a more active role in the battle against pollution. For example, China Orient has taken various measures to strengthen the presence of green finance, mainly to satisfy the demands on financing and financial services in such fields as low carbon, circulation and ecology, and has, through equity investment, industrial fund, merger and acquisition fund, trust plan and other forms, successively invested in solar power stations, energy storage equipment, clean coal utilization, petrochemical industry, biomass energy and other clean energy fields to support the development of clean energy technology enterprises and make contributions to the national environmental protection cause. Meanwhile, China Orient is also an active promoter to the innovative development of green finance, here taking its several subsidiaries as an example: Bank of Dalian has developed green credit products to provide a variety of convenient financial services for such green industries as ecological protection, clean energy, energy conservation and emission reduction, and comprehensive utilization of resources; Zhonghua Insurance has made continuous efforts to the innovation of green finance products, such as environmental pollution liability insurance and food safety liability insurance; Golden Credit Service Joined the ESG (environmental and social governance) statement on credit ratings specified in PRI (Principles for Responsible Investment) in 2016, and issued the assessment method of green bond certification in March 2017, so as to intensify efforts to research the influence of environmental factors in the field of credit rating, improve the assessment framework of green credit rating and green certification, and make every effort to promote the development of green finance.

II. Strengthen the capacity to serve the real economy and promote high-quality economic development

(I) Upgrade financial services and support supply-side structural reform

Being full-featured, group-based and highly networked, financial asset management companies, relying on their all-around financial services, have effectively promoted the transformation and upgrading of real enterprises and promoted the virtuous cycle in the support of finance to the real economy. In terms of China Orient, it has made great efforts and achieved positive results in such aspects as “breaking”, “establishing” and “reducing”.

Break up insufficient supplies. China Orient has actively adjusted its business policies, expanded the business authorization to its operating institutions, simplified its examination and approval process, and improved its assessment mechanism, so as to help real enterprises out of difficulties, and promote the clearance of “zombie enterprises” and the reduction of excess capacity. Meanwhile, the company has also actively innovated the operation mode of non-performing assets and actively participated in the financial operation of real projects through such means as “stock + increment”, “financial intermediary + investment and financing”, “fund + product” and “industrial mergers and acquisitions + finance”, so as to support the mergers and reorganization as well as debt reorganization and revitalize the stock assets of real enterprises. China Orient keeps providing financial support to key enterprises that, despite temporary difficulties, can regain their market competitiveness through deepening reform and strengthening internal management in accordance with the principles of controllable risks and sustainable business practices, while timely disposing of “zombie enterprises” by means of package sale, auction, realization and bankruptcy liquidation to speed up their market clearance. For example, China Orient, ever through the “stock + debt” reorganization mode, cooperated with GCL Group in restructuring Shanghai Chaori Solar Energy Technology Co., Ltd., and finally helped Chaori complete stock debt repayment and maintain its status as a listed company, thus effectively resolving China’s first corporate debt default crisis and making a positive contribution to the stability of capital markets. Besides, China Orient also, in active response to the call of the central government, works to promote the stable landing of the market-oriented debt-to-equity swap. In August 2017, it signed a market-oriented debt-for-equity swap agreement respectively with China Shipbuilding Industry Comply Limited (CSIC) and Dalian Shipbuilding Heavy Industry Group Co., Ltd., and increased its capital by 2 billion yuan to Dalian Shipbuilding Heavy Industry Group Co., Ltd. Through the acquisition of debt-to-equity swaps, while actively engaging in the market-oriented debt-for-equity swap programs of a number of state-owned enterprises, and fully supporting the deleveraging and excess capacity reduction in real enterprises.
Promote the conversion of old and new driving forces. Relying on its advantages in such aspects as comprehensive financial services, mergers and acquisitions and industrial integration, cross-border business and business innovation, China Orient is able to provide financial services throughout the value chain at all stages in an enterprise’s life cycle.

For real enterprises at the investment stage, Bank of Dalian, a subsidiary of China Orient, has developed “shuidaitong” and other supply chain financial products, and has been working to explore a financial service mode suitable for scientific innovative small enterprises through “the linkage of investment and loan”, thus powerfully supporting the development of scientific innovative enterprises and industries. Besides, the venture capital subsidiary of China Orient, through actively supporting innovative supplies and helping start-ups eliminate risks and explore business value, has accumulated numerous successful investment practices.

For real enterprises at the growth stage, China Insurance, Bank of Dalian, Dongxing Securities and relevant direct investment institutions (all subsidiaries of China Orient) actively provide them with financing, insurance, investment banking and other special financial services to help them actively expand the scale of production and continuously enhance their market competitiveness. For example, since2014, China Orient has successively cooperated with CSIC, AVIATION POWER, AVIC JONHON OPTRONIC TECHNOLOGY and other large state-owned military equipment enterprises to help them become bigger and stronger, and especially signed a strategic cooperation agreement with AECC AERO-ENGINE to provide long-term high-quality financial services for the R&D of the company’s core technologies and the industrialization of its scientific research achievements.

For mature real enterprises, China Orient not only provides them with a full range of financial services, but also focuses on research and trend analysis to help them grasp development direction, avoid and eliminate potential risks, rebuild new life cycle and realize upgrading.

For real enterprises in recession, China Orient gives full play to its advantages in the operation of non-performing assets to resolve risks regarding such enterprises, actively promote their mergers and acquisitions, fully excavate their residual value, and optimize their allocation of resources.

China Orient also actively participates in the innovative development of major local projects, technological upgrading projects and strategic emerging industries, and takes the lead in promoting the transformation and upgrading of local economies and the optimization of industrial structures.

Reduce the cost of the real economy. China Orient actively promotes the business and resource coordination between the group and its subsidiaries and between different subsidiaries, so as to meet the increasingly diversified and personalized demands on comprehensive financial services while reducing the intermediate costs of customer financing. For example, China Orient fully explores the customer value of the group, helps Dongxing Securities expand institutional customers and high net worth customers, and creates a service mode integrating “investment, financing and investment bank” for customers, and its subsidiaries, such as the Bank of Dalian and China Insurance, relying on their customer resources and channel advantages, strengthen their cooperation with Dongxing Securities in both online and offline businesses to build a complete value chain. All its subsidiaries give full play to their advantages at both the capital and asset ends, to resolve non-performing assets in an innovative way, improve the efficiency in disposing non-performing assets, and help the group reduce cost on the disposal of non-performing assets and other risk resolving businesses.

(II) Innovate rural financial services and support the rural revitalization strategy

Financial asset management companies actively practice the concept of inclusive finance and provide characteristic services in such aspects as financing and industry chain channels for agricultural products. Take China Orient as an example: over the past 10 years, China Insurance, a subsidiary of China Orient, has totally paid more than 27 billion yuan for agricultural insurance indemnity, benefiting about 40 million households, providing strong risk guarantee for agricultural development, and truly opening up the last mile to serve the farmers; China Insurance also, making full use of its insurance technologies, establishes an agricultural risk data platform involving more than 150 agricultural products, to achieve scientific, quantitative and accurate management, in addition to which it also joins hands with “Ant Financial” in establishing the joint venture “Nonglian Zhongxin Science and Technology Co., Ltd.”, to provide comprehensive financial services to farmers for leading agricultural enterprises and make the agricultural real economy more energetic, and cooperates with Jingdong Financial Group in such aspects as the innovation of agricultural financial service products, the expansion of rural financial services and the mobility of rural finance, to actively create one-stop financial services centering on rural areas, dominated by rural households and dedicated to providing rural households with “insurance + financing”; Bank of Dalian, a subsidiary of China Orient, takes “serving small and micro businesses” as an important strategy to improve the quality and efficiency in serving the real economy, and by giving full play to its platform advantages, explores multiple cooperation channels and innovate products to drive the fine development of small businesses, and optimizes business modes to alleviate the financing difficulties of small and micro businesses; Orient Finance, another subsidiary of China Orient, integrating petty loan, petty loan fund and Internet fund, designs to satisfy the financing service needs of farmers through the business mode of agricultural loan. To fully implement the spirit of the national teleconference on financial services for small and micro businesses, in 2017, China Orient increased the special funds for small and micro finance to Orient Finance by 2 billion yuan, pushed the Bank of Dalian to set up a separate business division of inclusive finance by the end of 2017, and requested China Insurance to further promote the agricultural insurance business.

(III) Actively align with national strategies and help regions achieve coordinated development

Financial asset management companies can provide all-around and one-stop comprehensive financial services, and also appropriate product structures and operation modes suiting different financial needs in regional coordinated development, to help promote regional coordinated development. Take China Orient as an example: the company takes the initiative to meet the demands of Xiongan New Area in such aspects as financial construction and infrastructure construction, carefully studies and formulates specific measures for its cooperation with Xiongan New Area, plans ahead and does well in various work regarding its cooperation with the new area, and gives full play to its own advantages and characteristics, to serve in an all-around way the “millennium project, state affair”, a major strategic decision and layout of Xiongan New Area.

In active response to the “Belt and Road” Initiative, China Orient makes an in-depth analysis on the development needs of regions along the “Belt and Road”, invests in power station construction, rail transit, expressway and other infrastructure fields through such means as private placement of convertible bonds (PIPE investment tool) and subscription of infrastructure debt investment plan, and provide financial services with Chinese characteristics for Chinese enterprises to “go global”. Golden Credit Service, a subsidiary of China Orient, as a comprehensive credit service institution with full industry chain, issues sovereign credit analysis reports regarding countries along the “Belt and Road”, and actively promotes the construction of the “Belt and Road” credit system.

(IV) Explore medical care for the aged and shoulder social responsibilities bravely

With the gradual acceleration of population aging in China, provision for the aged has become a common concern of the whole society. Financial asset management companies, under the premise of strengthening and enlarging the main business, namely the business of non-performing assets, should take actions to make up for the shortcomings of social development and actively explore new modes of medical care for the aged, considering which China Orient has actively cooperated with Beijing Anzhen Hospital to build and operate Beijing Anzhen Orient Hospital in Dongba Area, Chaoyang District. The project has been approved by Beijing Municipal Development and Reform Commission as the first pilot project in Beijing trying to introduce social capital for joint running of hospitals through franchising. This is an important measure taken by China Orient to invest in the medical industry and build massive health investment sector taking the opportunity of asset disposal, and to help alleviate the problem of difficult and expensive medical treatment by participating in diversified and multi-level hospital running programs. Besides, China Insurance, a subsidiary of China Orient, has made continuous efforts to innovate the pension insurance business and already formed an abundant product system including pension institution liability insurance program and pension annuity.

(V) Formulate differentiated business policies to serve the reform of housing system

Financial asset management companies conscientiously implement national real estate market regulation and control policies and adjust the structure of real estate businesses in a differentiated way. Take China Orient as an example: the company actively implements the urbanization deployment of the State Council named “three 100 million people” (encourage about 100 million rural residents to settle in cities and towns, transform shantytowns and villages in cities, where about 100 million people live, and guide about 100 million people to achieve nearby urbanization in the central and western regions), supplies in-depth financial support for destocking, strengthens research on the real estate market, formulates differentiated business policies, adjusts and optimizes business structure, and reduces the proportion of real estate financing business in the stock business. By the end of 2017, the company’s concentration in the real estate industry was down 20.56 percentage points from the end of last year. In the future, the company will closely follow up the reform of the national housing system, actively explore and innovate the leasing finance service, and try its best to explore such new businesses as real estate trust and investment funds.

(VI) Enrich participation modes and accelerate the construction of ecological civilization

In active response to the call that “lucid waters and lush mountains are invaluable assets”, financial asset management companies, relying on the advantages of full license, constantly innovate business modes for participating in the construction of ecological civilization. Take China Orient as an example: its subsidiary, Bank of Dalian, gives priority to the financing of low-carbon transportation projects by means of PPP, syndicated loan and “project loans + working capital loans”, ensures financing and credit granting to renewable energy, clean energy and other environmental protection industries through such means as right of future earnings, right of charge and receivables pledging, and sets up special loans for pollution control and emission reduction, as well as energy conservation and emission reduction, to make its services more professional while strengthening ecological and environmental protection.

III. Intensify both the foundation and internal strength to effectively improve the quality of financial development

Financial asset management companies should thoroughly implement the spirits of the 19th CPC National Congress, the Central Economic Work Conference and the National Financial Work Conference, and pursue the development goal of higher quality. They must continuously deepen self-reform, intensify both foundation and internal strength, promote business innovation, constantly improve the capacity to dispose non-performing assets, dissolve existing risks in the financial system, well manage interior risks in an all-around way, increase the efficiency in serving the real economy, and endeavor to ensure the transformation and high-quality development of social economy.

According to the deployment and regulatory requirements of the central government, China Orient, unswervingly sticks to its main business, serves national strategies, steadily promotes development transformation and, seizing the important opportunity of restructuring and introducing strategic investors, keeps improving its corporate governance structure in accordance with the standards for modern financial enterprises, adheres to the “two-wheel drive strategy” based on “asset management + bank and insurance” , constantly improves its management system and operation mechanism, take the initiative to adapt to new changes and demands in the non-performing asset market, actively plans for IPO and does the best to act as a national counter-cyclical management tool and a “safety net” and “stabilizer” for the financial system, strives to improve the capacity to serve the real economy and makes every effort to promote high-quality economic development.

(I) Improve the corporate governance structure basing around the group’s overall strategy

According to the governance norms for state-owned modern comprehensive financial service groups, consolidate the leading role of the party committee in the corporate governance structure, give full play to the role of the party committee in “guiding the direction, managing the overall situation, and ensuring the implementation”, properly divide the responsibilities and authorities of the party committee and the general meeting of shareholders, board of directors, board of supervisors and senior management following the principle of scientific combination and organic unification. Through the introduction of strategic investors and being listed, keeps optimizing the shareholding structure and improving the supervision and assessment system, while strengthening the standardized management of holding subsidiaries and making corporate governance increasingly scientific and standardized.

(II) Comply with regulatory requirements and plan for future development

Financial asset management companies should take the initiative to adapt to new development situations and regulatory requirements, adjust and optimize business structures, increase the investment in and the proportion of the business of non-performing assets, and strengthen and expand the asset management sector, and they should also scientifically define the functional positioning of the parent company and holding subsidiaries, strengthen business collaboration of the group, effectively reduce the operating cost, and better serve the real economy, while adjusting and optimizing capital allocation and striving to raise the efficiency of capital operation in alignment with the advanced standard within the industry.

(III) Implement penetrating management to strengthen the group’s overall control capacity

Financial asset management companies should vigorously improve the internal management level of comprehensive financial service groups starting from their management and control realities. To be specific, they should improve various management systems and management methods and optimize the incentive and restraint mechanism; strengthen comprehensive risk management, especially the prevention and control of highly sensitive risks such as credit, liquidity, crossing and concentration risks, to enhance risk prevention capability; in accordance with the principle of penetrative management, strengthen the control over the authority, finance, legal affairs and IT systems of holding companies at all levels, strictly standardize intra-group transactions and related transactions, and implement risk isolation requirements; strengthen information construction, optimize management and business processes, reduce cost, improve quality and increase efficiency, ensure the healthy and steady development of such groups in a sustainable way, and make new contributions to promoting the high-quality development of national economy. ( author: party committee secretary and president of China Orient Asset Management Co., Ltd.).

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