own AMC. The four “bad banks” were meant to gradually restructure and liquidate the bad loans, and then wind themselves down. Instead they grew in size and number. By 2018 the combined balance-sheets of the four companies amounted to some 5trn yuan ($755bn at the time), placing them among the largest financial institutions in China. As bad debts mounted in the early 2010s, regulators also approved batches of “local AMCs”, usually limited to one province. More than 60 such local entities have been created so far. Most are owned by local governments and other state investors; a handful, including 12-year-old Guohou, are in private hands. Instead of using their capital to strip bad loans from lenders’ balance-sheets, the AMCs began borrowing from banks at the same low rates as other state firms and lending at much higher ones to troubled companies. In effect, they turned themselves into lightly regulated investment banks, often catering to property developers that were booming at the time and have since toppled amid China’s housing crash. More troubling, they also created a tidy sideline in helping lenders hide bad debt from regulators. Academic estimates suggest such activities were so widespread that by 2020 they would have concealed at least half, and possibly much more, of China’s non-performing loans. That year Huarong, the biggest and most aggressive AMC, blew up and required a $6.6bn state bail-out. Its chairman, Lai Xiaomin, was later executed for a long list of crimes. But this has not deterred AMCs from pursuing questionable tactics. Documents from Guohou’s restructuring and insider analysis show that it mimicked many of these. In addition to picking up distressed assets, for example, it began making high-interest loans. It structured many of them to appear to be equity investments, which raise fewer red flags with regulators looking for concentration of debt risk. It also signed “drawer agreements” with banks, whereby it would purchase a lender’s non-performing loans just before these needed to be reported to regulators, only to sell them back shortly after and to pocket a fee. An investigation into the company found it had notched up operating losses for years and could not service its 13bn yuan in debts.

Such shenanigans suggest that Chinese banks’ non-performing loans may be much bigger than official figures suggest. On paper, they rose from 3trn yuan in 2022 to nearly 3.7trn in the first quarter of this year (see chart), though this is still a modest 1.5% of total assets. More bad loans, and bad AMCs, may surface as China’s rumbling property crisis further depresses the value of real estate, which many corporate borrowers offer as collateral. Cinda, a large centrally owned AMC, said this month that it expected net profits in the first half of the year to fall by up to 70%. This may reflect the collapsing value of the assets that back its bad-debt portfolios. Smaller local AMCs may follow Guohou into insolvency. One in China’s north-eastern rustbelt was suddenly dissolved in 2020 after making a dodgy loan to a football club. Others have been downgraded by local credit-rating agencies and are on the brink of collapse. Guohou is being restructured rather than wound down only thanks to interest from investors in its AMC licence. Regulators stopped handing these out last year. Those investors have not been disclosed. Whoever they are, they must have nerves worthy of bomb-disposal experts.■ This article was downloaded by zlibrary from https://www.economist.com/finance-and-economics/2026/08/13/is-chinas-debt-bomb- squad-about-to-blow-up

Finance & economics | Equity stakes Can Singapore ever build a proper stock market? The city-state wants to fill a hole in its financial portfolio Aug 13th 2026 SINGAPORE’S FINANCIAL chops are formidable. It trails only Hong Kong and Switzerland as a bolthole for plutocrats’ cross-border assets. It is the third-largest venue for foreign-exchange trades, behind America and Britain, a big one for physical commodities such as oil, a centre of trade and marine finance, and a hub for specialty insurance. What it lacks is a big bourse. For years low valuations and lower liquidity have led more firms to delist from the Singapore Exchange (SGX) than to list there. Local successes, such as Sea Group, a games-to-groceries digital giant worth $80bn, often choose New York over home. For all the talk of Singapore as a gateway to South- East Asian stocks, SGX has welcomed just 70 or so companies from its

region; as many as 40 others preferred distant Hong Kong. Between 2021 and 2023 the benchmark Straits Times index of Singapore’s 30 biggest firms (shortened, infelicitously, to STI) barely budged. Lately, however, the sleepy SGX has stirred. Since the start of 2024 the STI is up by around 75%, compared with 50% for Hong Kong’s Hang Seng index (see chart). The Next 50 index, which comprises what the name suggests, has risen by a third over the past year or so, handily beating the Hang Seng. Earnings are up, especially at Singapore’s impressive banks, but so is the ratio of share prices to forecast profits, suggesting investors have marked up Singapore Inc. Last year companies raised $2bn in initial public offerings (IPOs), a fraction of Hong Kong’s tally but the most since 2019. This year is on track to “substantially exceed” the last, with $1.1bn already raised so far, says Clifford Lee of DBS, a Singaporean bank. The revival owes much to the Monetary Authority of Singapore (MAS), the central bank. Even as places like South Korea and Japan have wielded sticks to reform their stock markets, such as tougher listing standards, Singapore has been all carrot. Entrants to the SGX get corporate-tax rebates and a joint- listing “bridge” with the Nasdaq, New York’s tech-heavy bourse. Listing requirements, on pre-IPO profits, disclosures and so on, have been loosened. Finger-wagging, such as a “watch list” of poorly performing firms, has been

cut back. Brokers, whose research investors use to make choices, get a government grant of up to S$6,000 ($4,690) every time they pen a report about SGX stocks. The monthly volume of research has more than tripled since July 2025, according to the MAS. The sweetest taproot is the Equity Market Development Programme (EQDP), a S$6.5bn pot of cash on offer to asset managers who can match a state dollar in Singapore stocks with a dollar or more of outside capital. So far the EQDP has handed S$4bn to nine investment firms. Greater demand could lead to peppier valuations, in turn making Singapore a more attractive place to list. The idea is to create “a flywheel”, says Leong Sing Chiong of the MAS, “not to distort the market”. To qualify for EQDP cash, investment firms are launching Singapore- focused funds. Pineapples, a good omen when rolled into a new home, according to local lore, feature heavily in the marketing materials for a new fund by JPMorgan Chase, an American bank, which promises that investors will be “rolling in income opportunities”. Fullerton Fund Management, a firm controlled by Temasek, a Singaporean sovereign-wealth fund, boasts that assets in its new EQDP fund aimed at retail investors have swelled from around S$300m to S$1bn since launching in October. Since the EQDP’s start in 2025 average daily trading volume in the STI is up by more than half. More firms are seeking IPOs; around 50 are thought to be queueing up. Later this year AirTrunk, a data-centre operator backed by Blackstone, a private-markets giant, hopes to raise $1.5bn by listing a real- estate investment trust (REIT) in Singapore. “This must be one of the best pipelines I’ve seen in my career,” says Carmen Lee of OCBC, another local bank. The government is not done yet. In February it announced that in 2028 the Central Provident Fund (CPF), Singapore’s $500bn mandatory pension scheme, would introduce voluntary “life-cycle” products that automatically rebalance from stocks to bonds over time. Most CPF savings currently sit in government bonds. If life-cycle products steer them towards local stocks, as happens with Australia’s vast superannuation funds, it would transform the market. The flows into Singapore equities could reach S$6bn annually,

equivalent to an EQDP a year, estimates Jayden Vantarakis of Macquarie, an Australian bank. Not everything is going Singapore’s way. Last year’s biggest listing, a data- centre REIT backed by NTT, a Japanese telecoms titan, flopped. Its shares are trading at 7% below the offer price. Just two of nine listings this year trade above their debut Later this year DayOne, a Singapore-based data- centre operator with most of its capacity in next-door Malaysia, plans to raise $5bn in an American flotation. A persistent gap between Singapore’s promises and performance regarding IPOs dents confidence, says a veteran banker. The city-state’s canny bureaucrats cannot fix this with cash alone. But it’s a start.■ This article was downloaded by zlibrary from https://www.economist.com/finance-and-economics/2026/08/13/can-singapore-ever- build-a-proper-stock-market

Finance & economics | Buttonwood Hooray for index funds—just don’t call them passive Jack Bogle’s creation has transformed markets, and involves plenty of choices Aug 13th 2026 The launch of the Vanguard First Index Investment Trust, 50 years ago this month, could have gone better. Jack Bogle, Vanguard’s founder, called it “an abject failure”. He had hoped to raise somewhere between $50m and $150m, but got only a little over $11m ($65m today). As the first fund aiming to do no more than track a stock-market index—America’s S&P 500—that was available to individual investors, it nevertheless raised hackles. “One conclusion, usually expressed with considerable feeling, is that index funds are a ‘cop-out’ and a fad that will soon disappear,” sniffed an article in the Financial Analysts Journal, published later the same year.