China’s Fosun Denies Reports of Mandatory Exposure Check by Banks
Following reports that Chinese regulators are requiring domestic banks and some state-owned enterprises to check their exposure to Fosun and related enterprises, the private investment company responded on September 14 that the news is totally false and that it has sought verification from regulators through various channels. Fosun also stated that it had learned the China Banking and Insurance Regulatory Commission has not made such requirements or received any notice about this matter either.
As a private investment company that has developed for more than 30 years, Fosun has a large number of subsidiaries engaged in a wide range of industries, including insurance and asset management, as well as biomedicine, consumption, culture and tourism and steel. As of the first half of this year, the group’s total assets were nearly 850 billion yuan ($122.1 billion), while its total liabilities were as high as 651.157 billion yuan with an asset-liability ratio of 76.64% – a huge overall scale.
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It is worth noting that Fosun has recently reduced its shares in several listed companies. On September 10, COFCO Engineering & Technology, an engineering services provider and equipment manufacturer in China, announced that Fosun Weishi (Hong Kong) Limited, a shareholder with 16.39% of shares, planned to reduce its stake through centralized bidding or block trading to no more than 6% of COFCO Engineering & Technology’s total share. According to the 2021 semi-annual report of COFCO Engineering & Technology in 2022, Fosun Weishi (Hong Kong) Limited is its second-largest shareholder.
News that Beijing state-owned enterprises received a notice from regulators to sort out the cooperation with Fosun (not limited to holding stocks, equity investment, capital lending, project contracting, guarantees and business cooperation), and evaluated the relevant cooperation risks, has caused heated discussion in the market for a while.
On the afternoon of September 13, Guo Guangchang, Chairman of Fosun, posted on Chinese social media that he had just finished overseas travel for several months and had been in quarantine in Shanghai. He wrote on Weibo, “I always believe that globalization is the common interest of all mankind, and Fosun’s competitiveness lies in its vision and ability of globalization. More importantly, as an enterprise rooted in China, China will always be Fosun’s most important base.”
Alex Gong, CFO of the company, said, “Fosun’s recent seemingly frequent reduction and sale is a continuation of the financial strategy of adhering to the balance of investment and withdrawal in the past few years. It is Fosun’s persistent work to dynamically sort out and optimize its asset portfolio, not just to cope with the current market environment. However, we also noticed that the complex external environment has increased the attention of public opinion on the disposal of group assets, which has led to a one-sided interpretation of individual asset disposal behaviors, while ignoring the general principle of group asset optimization, that is, long-term dynamic optimization.”