HONG KONG – Guangzhou International Trust and Investment Corp. (GZITIC), a financially troubled Chinese financial institution, has asked Japanese and other foreign creditor banks to relinquish claims on 60 percent of loans to the company, industry sources said Thursday.
GZITIC, a nonbank institution affiliated with the Guangzhou Municipal Government, is the second Chinese financial institution to request loan forgiveness this year.
Earlier this year, six Japanese banks agreed to relinquish claims on 40 percent of loans in arrears to Dalian International Trust and Investment Corporation, run by the city of Dalian, after the corporation told its Japanese lenders it would be forced to go under if they did not forgive some loans.
Other international trust and investment corporations may also have to forgive loans, which may reinforce feelings of uneasiness among foreign financial firms about China’s financial industry.
Anxiety has been growing among foreign institutions since Guangdong International Trust and Investment Corp., a nonbank run by the Guangdong Provincial Government, collapsed in January 1999.
As of August 1999, GZITIC had liabilities and debt guarantees totaling 29.7 billion yuan ($3.591 billion), with around 6.7 billion yuan worth of its assets estimated recoverable.
Earlier, the city of Guangzhou had proposed that 35 percent of GZITIC’s external debts be repaid over 10 years with the municipal government guaranteeing repayment, while a further 15 percent be repaid in 10 years after GZITIC sells its assets.
Creditor banks, however, rejected the proposal, prompting GZITIC to request loan forgiveness.
Negotiations are now under way between the creditor banks and GZITIC, with some foreign banks strongly opposed to any proposal that includes loan forgiveness, the sources said.