Warburg Pincus is setting up an asset management company in China to target bad opportunities in China’s debt-laden real estate industry.
The US private equity firm said on Monday that it and Chinese asset management company Wensheng jointly invested US$600 million to establish a partnership, aiming to build up to US$5 billion in assets under management in the next five years.
This is the latest example of a major U.S. bank and investor Build deeper connections Although there is a fierce geopolitical background between the two countries, it is in the entire Chinese financial industry.
At the same time, Beijing has begun to squeeze the country’s Huge real estate industry, Imposes leverage restrictions on its largest developer and restricts bank mortgages.
“In view of China’s ongoing financial reforms and the continuous development of supervision, the real estate industry with special circumstances is entering a track of accelerated growth,” said Zhang Qiqi, managing director of Warburg Pincus.
Since the beginning of this year, China’s non-performing debt sector has been attracting attention from the international market. HuarongThe state-backed distressed debt management company with $22 billion in debt denominated in debt failed to release its annual report in March.
After the execution of its former financial crime chairman in January, the delay raised questions about its 1.7 billion yuan (US$260 billion) balance sheet and caused sharp fluctuations in its bonds after the suspension of trading in its stocks.
Warburg Pincus was an investor before Huarong’s Hong Kong IPO in 2015 and currently holds 8% of the shares. Since 2005, it has invested USD 6 billion in real estate throughout Asia.
China’s rapid economic recovery has raised concerns about prices in its real estate industry. The so-called “three red lines” policy originally issued by the government last summer forced developers to comply with balance sheet indicators designed to control borrowing.
EvergrandeAs the country’s most indebted developer, its share price has fallen 33% so far this year and has begun a series of asset sales.in March, It said it has reduced its total interest-bearing debt by nearly a quarter to $103 billion.
Other US private equity companies are also active in China’s real estate sector.In June of this year, Blackstone announced that it had reached a US$3 billion acquisition of Soho China, Office developers. Earlier this year, it acquired an urban logistics park in South China for US$1.1 billion.
Other recent US joint ventures include the partnership between Goldman Sachs and the state-owned bank Industrial and Commercial Bank, which was announced in May.