A new report from PricewaterhouseCoopers forecasts ongoing gains in China’s copious pile of dud debt.
The PwC report estimates that China’s non-performing loans (NPL’s) and stressed assets hit USD$1.5 trillion in 2019, and is set to continue growing even when the impacts of the coronavirus aren’t included.
Official figures form the Chinese government point to 2.2 trillion yuan (approx. USD$316 billion) in NPL’s as of the end of June 2019.
PwC further estimates that international investors made $1.1 billion of investments in NPL’s in 2019, in affluent coastal provinces such as Jiangsu, Zhejiang and Guangdong, chasing annualised returns of between 13 – 15%.
“The size of the distressed market is huge,” said James Lilley, PwC partner based in Hong Kong, in an interview with Bloomberg.
“If you’re a distressed debt fund sitting in Boston, sitting in New York, sitting in London, the market is just so big it’s difficult to justify to [limited partners] why you’re not looking at China.”