Investors see good in Chinese bad loans

The gargantuan scale of non-performing loans NPLs in China and regulatory changes are likely to spur an uptick in foreign investment in the world’s biggest distressed asset market. But rising prices have squeezed profits, causing China to lag behind India and Latin America in returns.

James Dilley, a Hong Kong-based associate director of PwC, estimates that foreign investors will close deals for NPL portfolios totalling $1.5 billion to $2 billion in China this year. That is a considerable pick up on the roughly $2 billion invested in loans between 2015 and 2018. 

Over the past 18 months, foreign banks and funds have...