China's banking regulator orders lenders to check exposure to rapidly growing firms

 
Oliver Gill
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In 2015 Fosun purchased Club Med in a near-€1bn deal (Source: Getty)

China's banking regulator has instructed leading lenders to review their exposure to a group of companies that have rapidly expanded abroad.

Investments in Dalian Wanda Group, Anbang Insurance Group, Fosun International Ltd HNA Group and AC Milan owner Zhejiang Luosen are to be assessed, sources told Reuters.

Chinese financial journal Caixin reported earlier today that the China Banking Regulatory Commission (CBRC) made the request in order to head off "systemic risk" posed by domestic companies acquiring increasing numbers of global assets.

While the request was made earlier this month, news of the reviews appeared to be the source of negative rumours that led to the share prices of the firms taking a dive in trading earlier today.

Read more: Gemfields shares shine as Fosun confirms £220m takeover bid

Dalian Wanda, a conglomerate that has a extensive multi-billion pound investment in London's Nine Elms development, was forced into asking authorities to suspend trading in its film division after its shares plummeted 10 per cent.

It said in a statement: "Someone on the internet viciously speculated that some banks, including China Construction Bank, issued a notice to dump Wanda’s bonds."

Meanwhile, a spokesperson for Fosun told Reuters:

Everything is going well and normal with Fosun. Thank you for your concern.

Outbound investment by Chinese companies in the first five months of the year dropped 53 per cent from a year earlier, according to China's commerce ministry. In 2016 overseas deals by Chinese companies hit a record $170.1bn.

In March, Chinese insurance regulators planned to reboot overseas investment by local firms. In the six months prior the China Insurance Regulatory Commission (CIRC) had withheld sign-off of outbound investment. Until 2016 Chinese insurance mergers and acquisitions had been doubling for a number of years.

Anbang insurance had previously made the headlines after going on a $30bn spending spree in 2015 that included the purchase of New York's Waldorf Astoria.

Wei Hou, an analyst at Sanford C. Bernstein, told Bloomberg:

We are now in an environment where preventing financial risks is lifted as the top priority, so I think the regulators are trying to gauge the total exposure.

Regulators must have seen some red flags.

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