Opinion | Government by Hannity

This article is part of David Leonhardt’s newsletter. You can sign up here to receive it each weekday.

President Trump’s emergency declaration for a border wall is based on an obvious falsehood: There is no emergency at the U.S.-Mexico border. And because he was goaded into the declaration by Sean Hannity, the episode makes a mockery of the federal government.

But in the relative scheme of Trump’s misbehavior, the emergency declaration doesn’t rank very high. It’s not corruption or obstruction of justice. It’s not an attempt to undermine America’s alliance with Western Europe. And it doesn’t even matter much for immigration policy. If you’re trying to calibrate your Trump-related outrage, you can take a deep breath this morning.

“A presidential declaration of emergency in order to construct a wall would be stupid,” Lawfare’s Quinta Jurecic wrote. “It would be wasteful. It would test the limits of the president’s authority under the law in question. But it would not, in itself, be a step toward authoritarianism.” (Here’s the longer version of her case.)

[Listen to “The Argument” podcast every Thursday morning, with Ross Douthat, Michelle Goldberg and David Leonhardt.]

“This will be challenged in courts immediately, and it will be pretty easy to throw this thing out,” Neal Katyal, a former acting solicitor general, predicted on Lawrence O’Donnell’s MSNBC show last night.

“Trump’s fake emergency is a sign of weakness not strength,” tweeted The New Yorker’s John Cassidy. “He ran on the wall, he had two years of Republican control of Congress, and he still couldn’t get it financed. Weak president.”

And Philip Klein of The Washington Examiner made the conservative case against the declaration: “The only hope for limited government conservatives is that any emergency declaration gets quickly enjoined, and eventually nixed, in federal court. At least then, the silver lining would be that a legal precedent would be set that the president cannot attempt such an end around Congress.”

The China rivalry

“I’ve always thought Americans would come together when we realized that we faced a dangerous foreign foe,” my colleague David Brooks writes. “And lo and behold, now we have one: China. It’s become increasingly clear that China is a grave economic, technological and intellectual threat to the United States and the world order.”

I agree that the United States has been too complacent about the geopolitical challenge that China poses.

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David Leonhardt is a former Washington bureau chief for the Times, and was the founding editor of The Upshot and head of The 2020 Project, on the future of the Times newsroom. He won the 2011 Pulitzer Prize for commentary, for columns on the financial crisis. @DLeonhardt Facebook

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Fireworks banned at Chinese New Year

Ban comes amid concerns about high levels of pollution in the country and fears that the chemicals used in fireworks are part of the problem.

    Celebrations for Chinese New Year have been muted in a growing number of cities after a ban on fireworks was expanded.

    Beijing is one of them, as it tries to curb pollution.

    But the ban is also affecting a tradition that has lasted a 1,000 years.

    Al Jazeera’s Charlotte Bellis reports.

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    Starbucks launches all-day dining cafe in China

    SHANGHAI (Reuters) – Starbucks Corp said on Friday it would launch a new all-day dining cafe in China which will serve a brunch menu and cocktails, as the world’s largest coffee chain seeks to expand its retail offering in the increasingly competitive market.

    The opening of the cafe in the city of Shanghai comes as Starbucks has been facing slowing sales growth in its second-largest market amid pressure from a growing number of independent coffee shops and Chinese startups such as Luckin Coffee which offer cheap delivery and big discounts.

    “Today marks yet another significant milestone as we take everything we have learned around coffee and our relentless pursuit for food innovation, to create a new exciting all-day cafe dining and Italian aperitivo experience,” Starbucks China CEO Belinda Wong said in a statement.

    The Starbucks Reserve Bakery Cafe, which opens this weekend, is the firm’s first such store in China and will offer its premium coffees, freshly prepared food from its Princi Italian bakery and alcoholic drinks from a “mixology” bar”.

    The company also has similar cafes in the United States, where it has been pursuing an upscale strategy.

    Starbucks has benefited from a growing cafe culture in China but the trend has also given rise to a host of ambitious local competitors, including Luckin Coffee, which has said that it wants to open 2,500 new stores this year and overtake Starbucks as China’s largest coffee chain.

    Analysts say, however, that there are signs that Starbucks’ efforts to improve sales are gaining steam, with quarterly sales in China beating estimates last month, driven by new store openings and a delivery program that it launched with internet giant Alibaba last year.

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    China could use medical data to blackmail Americans, report says

    HONG KONG (BLOOMBERG) – Chinese investment in the United States biotechnology industry presents a risk to national security, potentially giving China’s government access to patient data that could be used to blackmail Americans, according to a report for a Congressional advisory commission.

    Biotech companies in China have access to technology and data through investments in US companies, partnerships with American universities and recruitment of US-trained researchers, the report for the US-China Economic and Security Review Commission said.

    “Chinese biotechnology companies are acquiring technologies crucial to advancement in the field as well as amassing large collections of clinical and genetic data on US residents,” the report published Feb 14 said.

    New US regulations have put biotech on the same level in terms of importance to national security as aerospace and microchips. Chinese investors have been a mainstay of recent fundraising by private biotechnology firms. At least one Chinese investor participated in 41 US biotech financing deals valued at a total of US$2.6 billion (S$3.53 billion) last year, according to Pitchbook.

    “Theoretically, access to private information on security-sensitive US persons creates a risk of blackmail and may reveal health conditions exploitable in a targeted attack,” the commission report said.

    The commission, which reports to Congress on national security implications of US-China trade and economic ties, released the report prepared by Gryphon Scientific, a consulting firm based in Takoma Park, Maryland, and founded by Rocco Casagrande, a former United Nations biological weapons inspector.

    While noting China is “a leading originator of cyberattacks on the US” that target personal health-care-related data, the commission’s report said there was no evidence so far that the Chinese government has used such data in a “strategic and hostile way.”

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    Sweden investigates its ambassador to China after report of secret talks to free publisher

    BEIJING (NYTIMES) – Sweden said it was investigating its ambassador to China after she was accused of arranging unauthorised, secret talks between the daughter of a Swedish bookseller detained in China and two Chinese men who had offered to help free him, but instead pressured her to keep silent.

    The backroom talks over the bookseller, Gui Minhai, were held in late January at a hotel in Stockholm, his daughter, Angela Gui, said Wednesday. She said she grew suspicious of the two businessmen as they asked bizarre questions and offered vague assurances, while wine flowed freely.

    Angela Gui accused the ambassador, Anna Lindstedt, of arranging the talks without authorisation from the Swedish Ministry for Foreign Affairs.

    The ministry said Wednesday that it had opened an internal investigation into Lindstedt, and that an interim replacement for her had been installed pending the outcome.

    “I placed my faith in a senior official and was rewarded with abuse, threats and an offer of assistance from two men who were clearly unqualified to help and appeared to have other agendas,” Angela Gui said in an emailed comment about the meeting. “I would like the ministry to explain how this byzantine situation arose.”

    Buster Emitslof, a spokesman for the Swedish Ministry for Foreign Affairs, said the ministry did not know about the meeting until after it had taken place. He said Lindstedt had been replaced, pending the outcome of an inquiry.

    “The Swedish government’s engagement on behalf of Gui Minhai is widely known, driven with force and aims for a solution that will give Gui Minhai his freedom and reunite him with his family,” Emitslof said.

    An email to Lindstedt asking for comment received the reply, “I have finished my mission in Beijing to move back to Sweden,” along with contact information for other embassy officials.

    The meeting was the latest extraordinary twist in a case with an abundance of bizarre episodes.

    Gui Minhai, 54, was born in eastern China. He travelled to Sweden to study in 1988 and became a citizen of that country in 1992.

    In recent years, he had worked in Hong Kong, the semi-autonomous Chinese city, where he was a co-owner of Mighty Current Media, a small publishing house that produced salacious and often poorly sourced books about Chinese Communist Party leaders.

    In 2015, he was spirited to China from his holiday home in Thailand as part of what appeared to be a secretive Chinese campaign against Hong Kong publishers of books deemed offensive to the Communist Party.

    In all, five Hong Kong booksellers disappeared, and they became symbols of the Chinese government’s tightening grip on publishing, news and culture in the city.

    Gui appeared on Chinese state television in early 2016, when he gave what seemed to be a heavily rehearsed confession to a drunken-driving death in China more than a decade earlier. He was formally freed from detention in October 2017, but he remained in eastern China, under heavy watch, according to Angela Gui.

    A year ago, two Swedish diplomats tried to accompany Gui Minhai to Beijing on a train, but Chinese security officers boarded the train and snatched him away. The Swedish foreign minister called it a “brutal intervention” that violated international rules.

    Soon afterward, Gui appeared on Chinese television, saying in an interview organised by police that he needed no help from Sweden.

    The case has remained a source of tension between the governments in Stockholm and Beijing, and Angela Gui has campaigned for her father’s release. She went to Stockholm to meet the two businessmen after Lindstedt, the ambassador, vouched for them, she said.

    But, according to a long account that Angela Gui published on Medium, the meeting was far from a typical diplomatic negotiation.

    “Nobody would tell me what was going on, or why it was that I had to be there,” said Gui, a graduate student at Cambridge University in the UK. “The businessmen spoke to me with a mix of flattery and reassurances that they were going to ‘help me,’ without explaining how this help was going to be delivered.”

    Over two days, Gui said, she was mostly confined to a hotel lounge where the men cajoled and pressured her to stop making public comments about her father.

    “There was a lot of wine, a lot of people, and a lot of increasingly strange questions,” she said. “I was told I needed to be quiet. I wasn’t to tell anyone about this, or say anything publicly about the case.”

    Gui said that even as she grew increasingly suspicious of the men, Lindstedt tried to persuade her to work with them and explained “that was the best course of action, as the negotiations handled by the Foreign Ministry ‘didn’t seem to make much progress,'” Gui said.

    Kurdo Baksi, a Swedish journalist who has worked with Gui to try to free her father, also went to the hotel, joining other Swedish and Chinese guests invited to hang around there by the businessmen.

    He said one of the businessmen had claimed to be from China, and the other from Sri Lanka.

    Baksi said he did not take part in the negotiations, but said the odd setting for talks worried him. “After a while I felt that everything became very uncomfortable,” he said. “I’m afraid this could complicate things for Gui Minhai.”

    Lindstedt, 58, became the ambassador to Beijing in September 2016. She began her diplomatic career in 1990, when she became second secretary at the Swedish Embassy in Indonesia. She went on to positions in Pakistan, then became ambassador to Vietnam, then Mexico.

    She was appointed climate ambassador in 2011, and was Sweden’s chief negotiator at the climate summit in Paris in 2015. It is unclear how Lindstedt became involved with the two men who met with Angela Gui.

    Last week, the Chinese Embassy in Stockholm responded to an earlier, less detailed account of the meeting, published by a Swedish newspaper, by denying that it had any role in the talks. “The Chinese side has never authorised and will not authorise anyone to engage with Gui Minhai’s daughter,” the embassy said in an online statement.

    A spokeswoman for the Chinese Ministry of Foreign Affairs, Hua Chunying, said Thursday that she had no information about the matter.

    Lindstedt is not the only ambassador in Beijing who has become entangled in controversy over China’s detention of foreigners.

    The Canadian ambassador was dismissed by his government last month after making contentious comments about Meng Wanzhou, chief financial officer of the Chinese telecom giant Huawei, who was arrested in Vancouver in December at the request of the United States.

    The Canadian envoy, John McCallum, surprised his government by saying that Meng had a good chance of avoiding extradition to the United States, a comment that critics said threatened to politicise the case.

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    No decision yet on whether to push back China trade deadline: Trump adviser

    WASHINGTON (Reuters) – The Trump administration has not yet made a decision on whether to extend a March 1 deadline for a trade deal with China, a top White House economic adviser said on Thursday.

    “I can’t speak to that. No such decision has been made so far,” National Economic Council Director Larry Kudlow told Fox News Channel when asked if there would be a 60-day extension.

    In the interview, Kudlow gave an upbeat assessment on high-level trade talks in Beijing, and said the U.S. negotiating team would meet with Chinese President Xi Jinping on Friday.

    “The vibe in Beijing is good,” Kudlow said.

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    Israel in trade balancing act between US and China

    JERUSALEM (AFP) – Torn between China and the United States, which have been in a trade war for the past year, Israel is performing a tough balancing act between its two main economic partners.

    Washington has raised concerns over China’s increased role in infrastructure and sensitive sectors such as technology of its close ally Israel, with which it shares close intelligence and military cooperation.

    These have reportedly been aired during visits to Jerusalem since January by both US Assistant Secretary of Energy Dan Brouillette and National Security Adviser John Bolton.

    The latter’s talks focused on the northern Israeli commercial and naval port of Haifa, according to Israeli media.

    Hong Kong-based Shanghai International Port Group won a tender four years ago to manage a new wharf at the port complex where US warships regularly dock.

    Former Israeli ambassador to China Matan Vilnai has said it was “madness” to entrust China with the management of such a “national security asset”.

    Mr Nadav Argaman, head of Shin Bet, the domestic Israeli security service responsible for counterintelligence, has reportedly warned against Chinese investments that could facilitate espionage activities.

    A former chief of the Mossad spy agency, Ephraim Halevy, has delivered similar warnings.


    Mr Danny Catarivas, a foreign trade expert at the Manufacturers Association of Israel, says Washington is putting pressure on Israel for tighter controls.

    “The United States is now pushing and insisting that Israel follow its example and create a foreign strategic investment control agency,” he told AFP.

    He said Israel’s security cabinet has decided to set up a committee – including representatives of the intelligence services – to oversee any foreign investment considered “strategic”.

    Asked by AFP, several official spokespersons refused to comment, with one saying that relations with China were “hyper-sensitive”.

    A transport ministry official, speaking on condition of anonymity, said the Haifa contract was awarded to the Chinese group “on purely professional criteria”.

    Mr Uzi Rabi, a Middle East expert at Tel Aviv University, told AFP that Israel must examine contracts with China “not only from an economic point of view, but also diplomatically and geo-strategically”.

    Chinese companies are making spectacular advances in Israel.

    They have won contracts for the construction of a new port in the southern city of Ashdod and tunnels for new light railway lines in Tel Aviv.

    According to experts, the Chinese make a third of their Israeli investments in the key hi-tech sector.

    Chinese firms are also interested in building a fast railway connecting Tel Aviv to the Red Sea resort of Eilat and constructing a desalination plant, according to economic media reports.

    China has become Israel’s leading partner for infrastructure, roads, tunnels and ports.


    Trade between China and Israel exceeded US$12 billion (S$16.29 billion) in 2018, nearly 200 times the level in 1992 when the two countries established diplomatic relations, data from Israel’s Central Bureau of Statistics shows.

    China has become Israel’s second largest trading partner overall after the US, and Prime Minister Benjamin Netanyahu in October proposed a free trade agreement between the two countries.

    Trade expert Mr Catarivas, however, said: “Transparency is not the strong point of Chinese investment.

    “You never know if the money comes from private companies and persons, or from the state and the Communist Party.”

    He said Israel could not cut off China, “a market in full expansion”, but the priority was to avoid damaging relations with the US.

    Israeli companies active in China or under the partial or total control of Chinese investors may one day be excluded from the US market if relations between the two superpowers deteriorate further, he said.

    In the key defence sector, US pressure has already had an impact on Israel, which receives nearly US$4 billion in annual US military aid.

    The Jewish state has pledged not to sell weapons or dual-use civilian and military technologies to China.

    Israel had its fingers burned in 2000 when the US vetoed the sale to China of an airborne command and control system equipped in part with US components.

    Israel was obliged as a result to pay several hundred millions of dollars in compensation to China for breach of contract.

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    U.S.-China trade talks move to higher level as deadline looms

    BEIJING (Reuters) – U.S. Treasury Secretary Steven Mnuchin said he was looking forward to trade talks with China on Thursday, as discussions in Beijing moved to a higher level in a push to de-escalate a tariff war ahead of a March 1 deadline for a deal.

    The talks, scheduled to run through Friday, follow three days of deputy-level meetings to work out technical details, including a mechanism for enforcing any trade agreement.

    “Looking forward to discussions today,” Mnuchin told reporters without elaborating as he left his hotel.

    He and U.S. Trade Representative Robert Lighthizer opened the meetings shortly afterward at the Diaoyutai state guest house with Chinese Vice Premier Liu He, the top economic adviser to Chinese President Xi Jinping.

    U.S. tariffs on $200 billion worth of imports from China are scheduled to rise to 25 percent from 10 percent if the two sides don’t reach a deal by the deadline, increasing pressure and costs in sectors from consumer electronics to agriculture.

    U.S. President Donald Trump told reporters on Wednesday that the negotiations had been progressing “very well”.

    Trump’s advisors have described March 1 as a “hard deadline”, and the president has said a delay was possible though he preferred not to do so. But, a Bloomberg report on Thursday cited sources saying he was considering pushing back the deadline by 60 days to give negotiators more time.

    Trump has said he did not expect to meet with Xi prior to March 1, but White House Press Secretary Sarah Sanders has raised the possibility of a meeting between the leaders at the president’s personal retreat at Mar-a-Lago in Florida.

    U.S. Department of Agriculture Deputy Secretary Stephen Censky said on Wednesday that the two presidents were expected to meet “sometime in March,” but no dates were set.

    The Chinese government has offered few details about the state of negotiations this week.

    Chinese trade data released on Thursday showed imports from the United States fell 41.2 percent from a year earlier to $9.24 billion, the lowest amount in dollar terms since February 2016.

    Exports to the United States also declined 2.4 percent to $36.54 billion, the lowest amount since April 2018.

    China’s trade surplus with the United States narrowed to $27.3 billion in January, from $29.87 billion in December.

    China’s soybean imports fell 13 percent in January from a year earlier, customs data showed, as a hefty duty on shipments from the United States, its second largest supplier, curbed purchases.

    The United States has used tariffs as leverage to demand Beijing make major structural policy changes, including ending the forced transfer of American technology, fully enforcing intellectual property rights, and curbing industrial subsidies.

    But China has denied accusations of trade abuses. While Chinese officials have repeatedly pledged to improve market access for foreign investors, few experts expect Beijing to agree to anything that would force fundamental changes to what Washington complains is its state-led approach to trade.

    China’s nationalist state-run Global Times tabloid said in an editorial late on Wednesday that though Washington had started the trade fight, it “was now more willing to reach an agreement”.

    “China will never harm its fundamental interests. The policy has been tested by the trade war and we have seen the change in Washington’s attitude,” the paper said.

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    Senate Democrats press Trump for China IP, tech transfer commitments

    WASHINGTON (Reuters) – Seven U.S. Democratic senators urged President Donald Trump on Wednesday to press China for a trade deal that fully addresses the technology transfer and intellectual property concerns outlined by U.S. Trade Representative Robert Lighthizer.

    Led by Senator Robert Menendez of New Jersey, the senators said in a letter to Trump that any deal with Beijing must at a minimum commit China to “cease the predatory practices” identified in USTR’s Section 301 investigation, which formed the basis for U.S. tariffs on Chinese goods.

    “As you approach the final weeks of negotiations with China, we urge you to insist that the deal make substantial, verifiable, and enforceable progress to address the myriad threats identified in USTR’s investigation,” the senators wrote.

    Several U.S. lawmakers and business groups have urged Trump in recent weeks not to settle for an agreement based largely on increased Chinese purchases of farm and energy commodities, amid signals that Trump is eager for a deal with Chinese President Xi Jinping.

    On Wednesday, Trump said trade talks in Beijing are “going along very well.”

    Lighthizer and Treasury Secretary Steven Mnuchin are due to meet with Chinese President Xi Jinping’s top economic adviser, Vice Premier Liu He, on Thursday and Friday.

    The letter from the Democratic senators reminded Trump of the main Chinese violations identified by Lighthizer’s investigation last year, including unfair investment restrictions and licensing practices that pressure U.S. companies into turning over technology to Chinese firms, state driven acquisitions of U.S. technology firms and state-sponsored cyber theft of American trade secrets.

    “Your negotiations should seek to extract meaningful commitments from China on each of these elements and end the threats that these policies pose to the U.S. economy and national security,” they wrote.

    In addition to Menendez, the letter was signed by Sheldon Whitehouse of Rhode Island, Mark Warner of Virginia, Maggie Hassan of New Hampshire, Ben Cardin of Maryland, Michael Bennet of Colorado and Catherine Cortez Masto of Nevada.

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    China's bad debt managers risk becoming bad credits themselves

    SHANGHAI/SINGAPORE (Reuters) – China’s bad debt managers, whom Beijing hopes to play a key role in resolving financial risks, are in danger of becoming bad credits themselves as the leverage crackdown that fueled a boom in their business now threatens their own access to funding.

    The practice of buying banks’ non-performing loans (NPLs) at a discount and recovering them for a profit has grown rapidly in China since 2016.

    It has attracted a slew of new local players as well as foreigners including Oaktree Capital Group and CarVal Investors as Beijing’s deleveraging campaign and economic restructuring produces a still-rising mountain of soured loans.

    But as China’s economy posts its slowest annual growth in 28 years amid the Sino-U.S. trade war, Chinese vulture funds are finding themselves mired in their own liquidity squeeze.

    The industry’s woes not only hamper Chinese banks’ ability to quickly offload bad debts to make room for fresh lending, but also increase financial risks in the system and threaten social stability as tens of thousands of retail investors lose their savings in vulture fund investments.

    Prices for bad loan portfolios have weakened amid a fresh avalanche of supply, dashing fund managers’ hopes for a quick turnaround of their assets.

    “In the past, domestic bad loan investors borrowed a significant sum of money to buy portfolios but they’re not able to borrow any more,” said Ted Osborn, partner at PwC.

    The deterioration in distressed asset prices is hitting the books of dozens of listed companies who rushed into the business a few years back.

    Even state-owned bad debt specialists – referred to as AMCs – are suffering.

    China Huarong Asset Management, the country’s largest AMC, reported a 61 percent decline in pretax profit generated by its NPL business in the first half of last year. Rival China Cinda Asset Management expects its 2018 profit to fall 30 percent, its first profit decline since its 2013 listing.


    Bad loan manager Zhejiang Dongrong Equity Investment Co is a case in point. It began defaulting on a series of bad loan investment products last August and is now offering goods including rice, milk and ham in part payment to pacify disgruntled investors.

    The private asset manager began to ramp up its NPL business three years ago in the aftermath of China’s stock market crash. In March 2016, general manager Zhang Wei told Reuters the company’s short-term plan was to grow its bad loan business to “tens of billions of yuan” and forecast annualized returns of roughly 13 percent.

    Today, Dongrong is sitting on nearly 9 billion yuan ($1.3 billion) worth of distressed assets and more than 20,000 individual investors in Dongrong’s fund products are demanding their money back.

    “I feel helpless,” said Zhou Jian, who invested 2 million yuan in a Dongrong NPL fund due to mature in January but has yet to receive any money.

    In a letter to investors, Ye Zhen, Dongrong’s founder, said the whole industry is suffering from liquidity stress and promised to return investors’ money in three years.

    Attempts by Reuters to reach Zhang and Ye by phone and email were unsuccessful.

    Rival Dong Fang Cheng An also cited a poor funding environment when it defaulted on a series of NPL products in December.

    “Since 2018, China’s NPL market has been impacted by the macro environment, with the bad loan recovery process being greatly lengthened,” the asset manager said in a statement on its website.

    The firm, which owes investors 7 billion yuan, said it has set up an emergency taskforce to deal with the liquidity issue.


    About $1.4 trillion of soured loans – including NPLs, distressed debt and loans in the “special mention” category – sit within banks and the four big AMCs, according to PwC. It expects distressed debts to grow as the economy slows and regulators push lenders to clean up their books.

    “I think this is the very beginning of China’s … NPL cycle and it will have many years to run,” said Osborn, who heads PwC’s China and Hong Kong Restructuring & Insolvency team.

    Chinese banks’ non-performing loans reached 2 trillion yuan in 2018, driving the industry’s NPL ratio to a decade-high of 1.89 percent, regulators say, even after lenders resolved nearly 2 trillion yuan in soured assets that year..

    Thanks to increasing supply, prices of bad loan portfolios dropped more than 10 percentage points between the first quarter and the third quarter last year, according to China Orient Asset Management, another state-controlled AMC.

    “Some asset managers acquired a large number of NPL portfolios previously. If they cannot dispose them quickly and recover the money, they could face liquidity risks when their short-term borrowings become due,” Chen Jianxiong, vice president of Orient AMC, told a recent conference. “In a slowing economy, it becomes more difficult to dispose of NPLs. Every asset manager is under big pressure at both the funding end and the return end.”

    One such firm is Shanghai Morn Electric Equipment Co, a maker of electric wires and cables. It ventured into the NPL business in early 2017, buying 10.9 billion yuan in NPL portfolios for that year and earning 97.2 million yuan in revenue from that business. But in October, it warned its 2018 profit would drop as much as 92 percent because of its NPL business.


    The struggles of local asset managers mean some foreign vulture funds with deeper pockets have sensed an opportunity.

    Avery Colcord, Managing Director of CarVal Investors, said China’s deleveraging campaign has helped wipe out some “fierce” local rivals and brought down bubbly prices.

    “We feel that fundamentals are quite favorable today,” he said, after CarVal completed two deals in 2018, its first since 2015.

    The view was echoed by Greg Ritchie, director of LVF Capital, which launched a $500 million fund in 2017 dedicated to investing in China’s NPL market.

    “A slowing economy is good for us,” Ritchie said. “One of the pros that western investors bring to the market is they have long-term money … For a lot of domestic money, it’s one-year money.”

    Shenzhen Qianhai Financial Assets Exchange data shows overseas purchases of bad loan portfolios in China nearly tripled last year to 30 billion yuan.

    “Compared with domestic investors, foreign buyers are more cautious, and would seek more adequate collateral, and deeper discounts,” said Li Jiaqi, executive director of the exchange’s cross border division.

    “They can hold assets longer, and wait throughout the cycle, for recovery.”

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