(Bloomberg) — China has asked one of its biggest state-owned conglomerates to examine the finances of China Huarong Asset Management Co., people familiar with the matter said, adding a new twist to the drama that has roiled the world’s second-largest credit market for months.

Citic Group, whose businesses span everything from banking to securities and mining, recently dispatched a team to Huarong to pore over the embattled distressed-debt manager’s books, the people said, asking not to be identified discussing private information.

It couldn’t immediately be determined what, if anything, might result from Citic Group’s involvement. In 2019 the conglomerate and China Everbright Group were asked to examine the books of troubled regional lender Baoshang Bank Co., one of the people said, but the lender was ultimately taken over by Chinese regulators.

Huarong, Citic Group and the China Banking and Insurance Regulatory Commission didn’t immediately respond to requests for comment.

Citic Group’s emergence as a new player in the Huarong saga comes as the bad-debt manager reaches the final stages of preparing its past-due 2020 financial results. Publication could come within the next few weeks, sooner than a previous internal timeline to announce by the end of August, a person familiar with the matter said.

Huarong’s fate has been the subject of intense speculation ever since it missed a deadline to report results at the end of March. That stoked speculation the state-owned company might be headed for a landmark default, sending its bonds to record lows. Doubts about the Chinese government’s support for Huarong have prompted a broader rethink of the decades-long assumption that Beijing will always stand behind the debt of state-controlled borrowers.

Chinese authorities have so far said little about their long-term plans for Huarong, leaving investors to guess at whether President Xi Jinping will make an example out of company as part of his campaign to rein in moral hazard. Citic Group’s involvement may signal the government is mulling potential “market-driven” solutions to Huarong’s debt issues, said Dan Wang, an analyst at Bloomberg Intelligence in Hong Kong.

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“A takeover is unlikely but Citic may be considering buying stakes or assets in subsidiaries,” Wang said.

Huarong’s dollar bonds were little changed on Monday morning in Hong Kong.

Established in 1979 to help pilot Deng Xiaoping’s economic reforms, Citic Group is a ministerial level financial conglomerate directly overseen by China’s State Council. That means it sits above Huarong in the nation’s complex hierarchy of government ministries and state-owned enterprises. Citic Group last year appointed former People’s Bank of China Deputy Governor Zhu Hexin as its chairman.

Citic Ltd., the group’s main listed arm, has about HK$9.7 trillion ($1.25 trillion) of assets and holds stakes in firms including China Citic Bank Corp. and Citic Securities Co.

While Citic Group is considered among China’s most important state-owned companies, some of its holdings have faced their own share of financial turbulence in recent years. Citic Guoan Group, part owned by Citic Group, was among a slew of companies that missed bond payments during a liquidity squeeze in local credit markets in 2019.

Huarong has been effectively frozen out of the bond market since the end of March, even as the company has continued to repay maturing notes on time and reached agreements with state-owned banks to ensure it can meet obligations through at least the end of August.

Some market observers have speculated Huarong’s recent history of scandals could make it an ideal candidate for default in the eyes of senior policy makers. Many of the company’s financial troubles stem from an ill-fated expansion under former Chairman Lai Xiaomin, who was executed for crimes including bribery in January.

Still, there are signs that Huarong can at least buy time as it tries to clean up its balance sheet and comply with regulatory orders to return to its core business of managing bad loans.

China Huarong International Holdings Ltd., the company’s main offshore unit, returned to a profit in the first quarter and said last week its business has continued to improve. The parent company appointed Liang Qiang as its deputy party secretary this month, gaining an industry veteran to help lead its overhaul.

Analysts at Bloomberg Intelligence estimate Huarong can raise more than $7 billion from asset sales, enough to service debt well into 2022. Higher prices on Huarong’s short-dated bonds suggest investors are pricing in a “muddle through” scenario in the near-term, Goldman Sachs Group Inc. analysts Kenneth Ho and Chakki Ting wrote in a June 18 report.

“Whilst we believe full government bailouts are less likely now than compared with the past, we do expect there will be government support if any pickup in credit stresses leads to systemic concerns emerging,” the analysts wrote.

(Adds analyst comment and today’s trading from 7th paragraph.)

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