May 25, 2018 / 7:03 AM / 9 months ago

China's Shenzhen broadens scope for bad debt sales to offshore investors: sources

BEIJING (Reuters) - China’s foreign exchange regulator has started to allow non-banking institutions in the southern boomtown of Shenzhen to sell soured assets to global investors, two sources with direct knowledge of the matter told Reuters on Friday.

The recent change means China’s asset management companies (AMCs), which buy non-performing loans (NPLs) from stressed financial institutions at a discount, can also sell bad debts overseas, the sources said.

Previously, only banks were allowed to sell bad loans to overseas institutions under a scheme that was launched in Shenzhen in mid-2017.

The Shenzhen branch of the State Administration of Foreign Exchange (SAFE) has also simplified applications for such sales and cross-border funding transactions, one of the sources said.

The moves are part of broader efforts by Beijing to reduce risks in its massive financial system, where the volume of commercial bank NPLs has hit a 13-year high of 1.77 trillion yuan ($277.12 billion).

Reuters could not immediately reach SAFE nor its branch in Shenzhen for comment. Chinese authorities have often used Shenzhen, a special economic zone bordering Hong Kong, as a test-bed for financial reforms.

Reporting By China Finance Team; Editing by Kim Coghill

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