On the morning of January 5, 2022, China Huarong held a press conference in Beijing, providing updates on strategic investor introduction and capital increase, the resumption of stock trading, as well as the Company’s operating results and development strategy for the next step, and answering questions raised by reporters. The on-site Q&A records are provided below:

　　Economic Daily: What are the considerations of China Huarong in the selection of strategic investors?

　　Wang Wenjie, Vice President of China Huarong: China Huarong carried out the strategic investor introduction and capital increase to implement the arrangements of the central financial authorities, prevent and resolve financial risks, and better fulfill its mission as a financial asset management company. Under the guidance and support of the regulator and big shareholders, we follow the market-oriented and rule-of-law principles in the introduction of strategic investors. The selection of strategic investors is based on three considerations. First, the investment is aligned with the government’s positioning of the investor and the investor’s strategic planning, and will further optimize China Huarong’s corporate structure and accelerate China Huarong’s entry into a new stage through fulfillment of shareholder rights and obligations according to law. Second, the investor shall meet the qualifications defined by the regulator for the shareholders of a financial asset management company. Third, the investor’s capital strength and market influence are also considered.  

　　China Huarong shows its heartfelt thanks to strategic investors’ confidence in and expectation for its future development, and has the ability and resources to create returns for shareholders. First, in terms of capital supplementation, through the introduction of strategic investors, we can supplement capital in a timely manner, improve capital regulation indicators, enhance risk prevention capability, and further reinforce the foundation for sustainable and healthy development. Second, in terms of funds and business, China Huarong enjoys huge room for synergy with strategic investors, and will carry out extensive cooperation with strategic investors based on its own business mode, advance the mutual support with shareholders according to laws and regulations, and improve internal risk control and profitability. Third, in terms of corporate governance, we will optimize the shareholding structure, complete modern enterprise management systems, perfect corporate governance structure, establish scientific decision-making, execution and supervision mechanisms, and prompt the regulated fulfillment of responsibilities by various sides. Fourth, in terms of market influence, the five strategic investors we introduced this time are all market leaders in respective industries and fields, and will help improve our market position and brand image.

　　Economic Information Daily: China Huarong introduced five strategic investors and financial investors this time. How will the strategic investors participate in and support the Company’s development?

　　Xu Wei, representative of CITIC Group: CITIC Group will participate in China Huarong’s corporate governance while following laws and regulations, give play to CITIC Group’s comprehensive advantages in finance and industry, and vigorously support China Huarong’s reform and development.

　　CITIC Group has always attached importance to synergic development, and will continue to advance the collaboration between its five major business segments with China Huarong. During the 14^th Five-year Plan period, CITIC Group will be further dedicated to comprehensive financial services, advanced intelligent manufacturing, advanced materials, new consumption and new-type urbanization. Relying on rich industrial experience and business resources and giving further play to the role of synergy, it will make full use of current business capabilities and resources, establish the mechanism to coordinate with China Huarong in project expansion, investment, financing and business innovation, strengthen the information linkage and win-win cooperation between CITIC’s business segments with China Huarong, and help China Huarong improve the comprehensive competitiveness in the NPA business.

　　Synergetic development is a continuous process and requires constant exploration and innovation. We have the confidence to team up with China Huarong to deepen the synergy and make it produce pragmatic results. After investing in China Huarong, we will follow the market-oriented and rule-of-law principles, and prompt China Huarong to uphold the correct positioning, optimize corporate governance and strengthen rick control; we will also help China Huarong focus on the main business of NPA management, bail real economy out of financial difficulties, and develop into a benchmark for the NPA management industry.

　　Luo Yihong, representative of Zhongbao Rongxin Fund: I’d like to add something on behalf of Rongxin Fund. As an investment platform for the insurance industry, China Insurance Investment Co., Ltd. set up Rongxin Fund, which raised funds from 18 institutions to be invested in China Huarong. The insurance institutions earlier had sound cooperation with China Huarong in NPA management. With the completion of the capital increase, China Insurance Investment Co., Ltd. will further expand cooperation with China Huarong while observing laws and regulations and keeping risks under control, and vigorously explore the opportunities for cooperation on asset restructuring and market-oriented debt-to-equity swap, so as to achieve complementation of advantages, business synergy and experience sharing, better advance China Huarong’s return to and focus on the main business, and jointly support the high-quality development of real economy.

　　Securities Times: How will you use the funds raised through the strategic investor introduction and capital increase? How about the capital adequacy ratio after the capital increase?

　　Head of the Board Office of China Huarong: Through the strategic investor introduction and capital increase in which we offered domestic shares and H shares through private placement, we raised RMB42 billion of funds in total. After deduction of relevant issuance fees, the funds will be used to supplement the Company’s Core Tier One Capital. All the funds raised have been in place, ensuring our capital adequacy ratio to meet regulatory requirements and what is required for the issuance of the 2021 annual report and in the regulatory rules of the place of listing. The actual capital adequacy ratio is subject to the annual report released by the Company.

　　China Securities Journal: What do you think about the stock price after the resumption of trading? What measures will you take to stabilize the stock price?

　　Head of the Board Office of China Huarong: First, in the strategic investor introduction and capital increase, our issue price was RMB1.02 per share, which is of positive significance to the Company’s stock price after the resumption of trading. As for the net asset value per share, the net asset value per share after the additional issue will increase from RMB0.46 by over 60% to RMB0.75, adding to shareholder’s equity and indicating investors’ recognition of the Company’s investment values and confidence in the Company’s long-term development. As for stock price, the Company’s stock price was HK$1.02 per share before the suspension of trading, and gains by over 20% based on the current issue price, safeguarding the interests of all investors, particularly small and medium-sized investors. As for valuation, the valuation of financial institutions has been low recently, or even lower than net assets. With the share issue at premium in the capital increase, the Company’s valuation increases a lot than that before the resumption of trading, which will help improve the Company’s investment values.

　　As for the stabilization of stock price, our management has always attached importance to the Company’s performance in the capital market. However, our stock price in the secondary market depends on not only internal factors like operating results, but also external factors like macroeconomic environment, regulatory policies, industrial trends and market sentiments. At China Huarong, our top priority is to run the Company in a sound manner, improve performance and ensure operation compliance, so as to achieve the healthy and sustainable development of the Company and create values for investors. If we have any follow-up plans, we’ll disclose the information in a timely manner.

　　China Banking and Insurance News: What about China Huarong’s operating results in the NPA business in 2021? What were the highlights? How will you run the main business in 2022?

　　Head of the Business Management Department of China Huarong: In 2021, in face of the complex and changing internal and external operating situation, China Huarong, in accordance with the general requirements for the “year of transformation and year of breakthrough” defined by the Company's Party Committee and centering on the four central aspects of work, i.e. “alleviating risks, activating stock assets, optimizing incremental assets and reinforcing the foundation”, properly responded to the changes in situation, stayed committed to the main business, and stepped up efforts to make breakthrough in stock assets and improve the quality of incremental assets. As a result, work in all aspects was advanced in an orderly manner, and positive progress was achieved, in which the “main business kept a stable size, stock assets were activated at a faster pace, and business transformation produced continued results”.

　　First, we actively met the changes in situation, with the main business keeping a stable size. Based on the core functions of counter-cyclical and risk resistant tools, we stuck to strengthening and refining the main business, and carried out NPA acquisition-based disposal and restructuring business vigorously and prudently. As for the disposal business, we participated in market competition actively and rationally. Despite the growing number of participants and mounting pressure in competition, we still stay ahead in market shares, with no smaller efforts in the mass acquisition of NPAs. As for the restructuring business, we actively seized the opportunities arising from the “broad NPA” business, enriched the targets of acquisition and expanded the fields of business. With improving asset values as the starting point, we worked to tap the potential of the NPA business, and sought for opportunities in fields like bankruptcy restructuring, the split between main and auxiliary businesses at State-owned enterprises, bailout for large enterprises, “four reforms and one guarantee”, judicial sale of assets, acquisition of defaulted bonds and bailout for listed companies. As a result, the size of projects in relevant fields grew steadily.

　　Second, we made full use of various channels and accelerated the activation of stock assets. First, through online platforms like our official website, the Rongyitao mini program, lives.jd.com and Alibaba Recommendation and offline asset promotion meetings, we promoted assets via diverse channels, by different regions and industries and in multiple batches. The assets we promoted involved over 7,000 debtors and the size of creditor’s rights was about RMB370 billion. Each promotion activity brought us into contact with many investors, which accelerated asset disposal. Second, we worked to improve the benefits and effectiveness of asset disposal. With the goal as fully tapping the values of NPAs, we actively sought for the assets with restructuring values and appreciation potential across the industrial chain, adopted the profit model focused on the improvement of asset values through asset restructuring, resources integration and counter-cyclical cultivation, and further pushed forward active acquisition, diversified ways of disposal and delicacy management, so as to improve business quality and efficiency in an all-round way.                 

　　Third, we made clear goals and advanced business transformation in a deep-going way. Across the Company, we established the philosophy of enabling the high-quality development of new China Huarong through business upgrade and continued to deepen business transformation, which produced positive results. First, the restructuring of troubled enterprises made up a steadily increasing share, while our core functions, i.e. “disposal of distressed assets”, “activation of defective projects”, “restructuring of troubled enterprises” and “bailout for institutions in crisis”, were intensified. Second, centering on the “broad NPA” business, we successfully implemented or facilitated a number of key projects, such as the bankruptcy restructuring of Huishan Dairy, the bankruptcy and restructuring of SanPower Group, the bailout for GCL Power, the acquisition of defaulted bonds of Xinjiang Guanghui, the bankruptcy and judicial sale of the assets of Qingdao Fuhang, and the split between the main and auxiliary business of Weipeng Group, effectively restoring and improving the market influence of China Huarong. Third, we cultivated our customer group, ecological circle and friends circle that are stable in the long term and aligned with the broad NPA business. We integrated external resources, fostered upstream and downstream customer groups including financial institutions, intermediaries and second-tier investors, strengthened contact with industrial leading enterprises, law firms, investment banks, bank preservation departments and AIC, property funds and specialized property integrators, established channels for business cooperation, and continuously advanced the formation and improvement of our customer ecological circle and friends circle for NPA operation. All these laid a solid foundation for our business development in the next step. Fourth, the product system was increasingly improved. Centering on customer demand, we combined multiple means, including NPA acquisition, additional investment, merging & restructuring, bankruptcy and reorganization, mezzanine investment, bridge financing, and stockholding at a particular stage, to provide comprehensive and customized service plans. Meanwhile, we actively seized new opportunities arising from the pilot projects launched by the regulator, and steadily carried out personal loan and single debtor asset transfer business.

　　In 2022, standing at a new historical staring point, China Huarong will focus more on the main business and concentrate more resources and energy on the main business. By vigorous business exploration and continued cultivation of the NPA customer circle and friends circle, China Huarong aims to be a plan developer, resources integrator and financial investor in the broad NPA industry.

　　21st Century Business Herald: China Huarong has entered a new stage of development. What’s your detailed plan to strengthen and fine your main business?

　　Xu Yongli, Vice President of China Huarong: The completion of the strategic investor introduction and capital increase opens a new chapter for China Huarong. In the future, China Huarong will resolutely implement the work arrangements of central financial authorities, and, guided by the CPC Central Committee, State Council, big shareholders and the regulator and based on its positioning as a financial asset management company, speed up business transformation and continue to strengthen and refine the main business.

　　Concretely speaking, we’ll intensify the four functions, i.e. “disposal of distressed assets”, “activation of defective projects”, “restructuring of troubled enterprises” and “bailout for institutions in crisis”, to reinforce the core competence of our main business. First, we’ll dispose of distressed assets. With financial or non-financial non-performing loans as the starting point, we’ll move from passive NPA acquisition to active NPA packing, and combine diverse means like creditor’s right transfer, debt restructuring and asset securitization to restore the liquidity and profitability of distressed assets and alleviate the stock risks in finance and real economy. Second, we’ll activate defective projects. Proceeding from the defective projects with restoration values, we’ll employ means like financial restructuring, asset restructuring and additional investment, and make investment in which equity makes up a smaller part while debts a bigger part, to improve the allocation and operating efficiency of project assets, ease the financial debts involved in defective projects, and increase the yields of real economy. Third, we’ll restructure troubled enterprises. Starting from the analysis and integration of the debtor-creditor relations of troubled enterprises, we’ll use debt restructuring, equity restructuring, debt-to-equity swap and M&A, amongst others, to eliminate or alleviate the adverse impact of debts on the operation of troubled enterprises. Fourth, we’ll offer bailout funds for institutions in crisis. Based on national strategies and major financial risk control requirements, we’ll introduce means like trust & liquidation, M&A, introduction of third-party investment and bankruptcy reorganization, and carry out substantial restructuring and financial bailout to effectively dispose of or activate the financial institutions or enterprises with high risks or in crisis.

　　China Business Journal: China Huarong has advanced institutional downsizing to return to the main business in recent years. How is it going on now? What’s your future plan? How will the transfer of the subsidiaries with financial licenses influence China Huarong’s development strategy?

　　Xu Yongli, Vice President of China Huarong: Given the regulator’s requirements on the withdrawal by financial asset management companies from auxiliary businesses, China Huarong is advancing the transfer of the equity in subsidiaries with financial licenses in an orderly manner and pursuant to market-oriented and rule-of-law principles. We earlier announced the plan to restructure or transfer the equity in our subsidiaries including Huarong Trust, Huarong Securities, Huarong Financial Leasing and Huarong Xiangjiang Bank. At present, the change in the registration at industrial and commercial authorities for the transfer of the equity in Huarong Trading Center has been completed; Huarong Consumer Finance has signed an agreement on equity transfer with the Bank of Ningbo. The valuation of the equity in Huarong Consumer Finance to be transferred was RMB727 million; after online bidding at Beijing Financial Assets Exchange by investors, the final transfer price is RMB1.091 billion, a relatively big premium. Following the principles of ensuring the State-owned financial assets to maintain and gain values and safeguarding the rights and interests of investors, we are advancing the transfer of equity in our other subsidiaries with financial licenses in a steady and orderly manner. In case of any further progress, we’ll perform our duty in information disclosure in a timely manner.

　　On one hand, the transfer of subsidiaries with financial licenses will help supplement the Company’s net assets in a timely manner. On the other hand, the move will help the Company center on its positioning as a financial asset management company defined by the government, and concentrate more resources, funds and capital on the main business of NPA management in line with the established development strategy of “returning to the origin and focusing on the main business”, so that we can boost our endogenous driving force and core competence and further improve our capability in serving real economy and resolving financial risks.