China’s banking regulator has ordered a probe into banks’ exposure to some of the country’s best connected and most acquisitive firms, as concerns grow over systemic risk posed by their buying spree.
Liu Zhiqing, deputy director of the China Banking Regulatory Commission, told journalists on Thursday that his agency was worried about “the systemic risk of some large enterprises” and whether it could be transmitted to other institutions, including China’s smaller banks.
He declined to give specific names of firms involved, saying the order applies “broadly”.
Shares in listed companies owned by real estate-to-entertainment giant Dalian Wanda, consumer conglomerate Fosun, and acquisitive airline group HNA all fell sharply on Thursday as news of the order – which also covers unlisted insurer Anbang – spread rapidly.
The companies are affiliated with a wide range of political factions, giving credibility to the crackdown and indicating Beijing’s resolve to tackle a problem that is increasingly worrying regulators. The concern is that overseas assets were acquired by Chinese firms using creative financing methods, including issuing of high-interest financial products.
Dalian Wanda, whose chairman Wang Jianlin is one of China’s richest men with a fortune estimated at $31bn, was particularly hard hit.
The company’s film unit applied for a trading halt after its Shenzhen-listed shares fell nearly 10 per cent during the Thursday morning session, wiping out $1bn of equity value. The yield on a dollar bond due in 2024 for the recently delisted Dalian Wanda Commercial Properties rose 1.628 percentage points on Thursday to 6.708 per cent.
The company initially blamed the drop on online rumours, and was forced to deny that a major Chinese bank had issued instructions to sell the company’s debt.
“There are people today who spread the rumour that China Construction Bank has issued an order to sell Wanda’s bonds. After investigation, CCB never issued such a notice,” Wanda said on its official account on the Chinese social media site Weibo.
A person close to Dalian Wanda said that Mr Wang was at work on Thursday and was “safe, happy, and at his desk”.