An asset management company (AMC) responsible for handling bank bad debts and acquiring non-performing assets has declared bankruptcy reorganization. Some analysts believe that this may indicate that the debt in the financial system is difficult to resolve, and the measures used by the Chinese Communist Party to securitize bank funds and revitalize assets are a Ponzi scheme.
Data shows that China’s total macro debt (including government, corporate, and household sectors) has reached a staggering 45.86 trillion yuan, with the overall macro leverage ratio climbing to around 319%, far exceeding the total amount of GDP in a single year. By the end of May, the balance of the Chinese government’s debt had surpassed the 100 trillion yuan mark, doubling within five years.
Although the CCP claims that systemic risks are safely manageable, the AMC originally responsible for acquiring and disposing of bank non-performing assets has now faced risks. At the end of July, a local AMC in Anhui, the Anhui Guohou Asset Management Co., Ltd., officially entered bankruptcy reorganization proceedings. The identities of the potential buyers have not been disclosed yet.
In April 2014, the Anhui Guohou Asset Management Co., Ltd. was established. Starting in 2015, it began cooperating with the Huishang Bank to operate urbanization funds, with managed fund sizes exceeding 100 billion yuan. After engaging in high leverage and aggressive business operations, a liquidity crisis erupted. On December 1, 2025, the troubled Guohou Asset officially applied for pre-bankruptcy reorganization to the court.
An article by The Economist on August 13th suggests that with the ongoing real estate crisis in China further depressing property prices, more bad debts and distressed AMCs may emerge in the future. The reason is that many corporate borrowers have used real estate as collateral for loans. Smaller local AMCs may follow in the footsteps of Guohou Asset, heading towards bankruptcy reorganization. Some local AMCs have already been downgraded by Chinese domestic credit rating agencies and are currently on the brink of collapse.
China’s asset management companies can be traced back to 1999 when the Ministry of Finance of the CCP established the four major AMCs with the primary task of taking over bad debts that the four major state-owned banks struggled to deal with, and then gradually restructuring and liquidating them. Originally, these AMCs were supposed to exit after completing their missions, but their asset management scale has instead continued to grow. As of April 30, 2026, the four major AMCs have successively released data on their assets and revenue in 2025, with total assets exceeding 4.6 trillion yuan.
Guohou Asset, which has applied for bankruptcy, is one of the first five local AMCs established. The remaining four are in Jiangsu, Zhejiang, Shanghai, and Guangdong. In recent years, more than 60 local AMCs have been established in various regions across mainland China.
AMCs are mainly responsible for acquiring “non-performing assets” (commonly referred to as bad debts, non-performing loans, or debts that cannot be repaid on time) from banks or financial institutions and recovering funds through collection, restructuring, auctioning off collateral, or resale.
However, The Economist believes that China’s AMCs also assist banks in concealing bad loans. Such operations could mask at least half, if not more, of China’s bad loans. Guohou Asset was found to have signed so-called “drawer agreements” with banks, in which they buy the non-performing loans before the banks report them as bad debts, and then sell them back to the banks after the bad debt is reported, thereby collecting fees.
An article titled “China’s ‘National Ponzi Scheme'” published in Taiwan’s Wealth Magazine analyzes the CCP’s debt resolution and asset revitalization measures, emphasizing that the money truly coming out is from bank depositors, whether in the form of loans or asset securitization. Logically, if one day the banks completely cash out the funds available for lending, the game of debt resolution and asset revitalization that cannot generate cash flows will come to an end.
The article conservatively estimates that if China’s total debt (including hidden debt) is calculated with an annual interest cost of 3%, the annual addition of interest alone will reach 4.29 trillion yuan in the future. Meanwhile, the budget deficit mentioned in the 2026 government work report is 5.89 trillion yuan and is expected to increase by the year-end.
The article argues that while the revitalization of assets constitutes the government’s foundational income, the ultimate source of funds is bank loans; the funds for the budget deficit come from banks purchasing government-issued bonds, ultimately relying on bank loans. The CCP government, with massive annual budget deficits, has no way to truly reduce debt. Banks can only continue to increase lending to the CCP government until they run out of money to lend. This situation represents a national-level Ponzi scheme, which is the best summary.