FAIR III – Session V

Developing the Asian MarketsPRC Experience

David Kidd

Allen & Overy

11 November 2003

ALLEN & ALLEN & OVERYOVERY

FAIR III – Session V

PRC NPLs - the story so far

AMCs (Cinda, Huarong, Great Wall, China Orient) established in 1999

1.4 trillion yuan (US$170 billion) transferred by ICBC, BOC, CCB and ABC

To date 21.5% sold by AMCs “NPLs cloud Big Four banks” - 6.11.03

ALLEN & ALLEN & OVERYOVERY

FAIR III – Session V

Resolution issues

Legal framework State ownership Real estate Restructuring culture

ALLEN & ALLEN & OVERYOVERY

FAIR III – Session V

Legal framework

1986 Trial Bankruptcy Law 1991 Civil Procedure Law 2002 Supreme Court interpretation New law in 2004? GITIC landmark (cf GDE) Judiciary

ALLEN & ALLEN & OVERYOVERY

FAIR III – Session V

State ownership

PRC a socialist centrally planned economy Approval processes are slow Move towards private ownership and

improved corporate governance Role of SOEs in employee welfare

ALLEN & ALLEN & OVERYOVERY

FAIR III – Session V

Real Estate

All land owned by state (urban) or collectives (rural)

Allocated/Granted/Leased Security over tangibles Enforcement slow Employee rights

ALLEN & ALLEN & OVERYOVERY

FAIR III – Session V

Restructuring experience

GDE/FJE/ITICs/Zhu Kwan Government support after GITIC Inertia, indecision and limited local

experience (but no dominant family interests) Must combine international experience with

local knowledge through strong servicing vehicles

ALLEN & ALLEN & OVERYOVERY