Insights and Analysis

Investing in China’s private debt markets: opportunities for foreign investors

07 May 2021

Greater China presents attractive opportunities for foreign investors as the world gradually comes out of the pandemic particularly in terms of China’s non-performing loan (NPL) market.

Even before COVID-19 further tightened the screws, many Chinese companies were in desperate need of debt financing, something which has led foreign funds to seek out opportunities to invest in China’s burgeoning private debt market.

Greater China presents attractive opportunities for foreign investors as the world gradually comes out of the pandemic particularly in terms of China’s non-performing loan (NPL) market. The rapid growth of credit in China over the years has been tempered more recently as the Peoples' Bank of China focuses on reining in financial risks given the uncertainties currently surrounding the regional and global economy. With banks being forced to cleanse their balance sheets to make way for fresh lending, businesses are having to turn to alternative sources of finance.

This combination of factors has created a "perfect storm" of opportunities for investors who feel confident in navigating the complexities of China’s investment regime.

In our publication, Investing in China's debt markets: opportunities for foreign investors, we look at:

Strategies for offshore financing to PRC corporates, including the provision of cross-border loans to PRC corporates, and the acquisition of debt assets from the original lenders.
Recent regulatory developments that facilitate the incurring of debt from overseas by PRC corporates.
Recent judicial developments that make it easier for offshore investors acquiring debt assets from the original lenders to take security.
Possibilities of onshore financing to PRC corporates.

We also consider moves by Chinese regulators to make the sector more attractive to foreign investors, including the role of national-level and local asset management companies (AMCs), Financial Asset Investment Companies (FAICs), the role of Qualified Limited Partnerships (QFLPs), and wholly foreign-owned enterprises (WFOEs).

Click here to read more.

Authored by Jonathan Leitch, Andrew McGinty, James Wood, Shantay Cong, Weiying Zhang, and Nigel Sharman.