Highlights

• Northern Rare Earth conducts semi-annual risk assessment of Baogang Group Finance.
• Baogang Group Finance is found to be compliant and well-capitalized.
• The finance arm maintains strong financial metrics, including a 30.76% capital adequacy ratio and zero non-performing loans.
• The company strategically holds 63.9% of its cash deposits in the group finance company, demonstrating internal capital management.

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China Northern Rare Earth Group High-Tech Co. (Northern Rare Earth), one of the world’s leading rare-earth producers, has released its semi-annual risk assessment of Baogang Group Finance Co. Ltd., a group finance company in which it holds an 8% stake. The review—conducted under Chinese securities and banking regulations—found the affiliate compliant, well-capitalized, and free of material risks that might affect Northern Rare Earth’s deposits or access to credit.

Key Financials

As of June 30, 2025, Baogang Group Finance reported RMB 12.20 billion ($1.68 billion) in assets, down about 12% from year-end 2024. First-half net profit reached RMB 88.4 million ($12million), compared with RMB 177.8 million ($24 million) for all of 2024.The capital adequacy ratio stood at 30.76%—nearly three times the regulatory minimum of 10.5%. The liquidity ratio was 54.78%, more than double the required 25%. The loan ratio was 61.3% against an 80% cap, and the firm reported no non-performing loans.

Governance and Risk Controls

The finance arm operates within a multi-layered governance structure, comprising a board of directors, a party committee, and three oversight committees: audit, risk management, and strategy/compensation. Internal systems encompass credit review, liquidity management, anti-money laundering, IT security, and audit compliance, with a focus on segregation of duties and cross-checks across departments.

Deposits and Lending Exposure

By mid-2025, Northern Rare Earth held RMB 3.76 billion ($520 million) in deposits at Baogang Group Finance, accounting for 63.9% of its total cash. Outstanding loans from the finance unit were just RMB 0.5 billion ($70 million), compared with RMB 8.62 billion ($1.2 billion) borrowed from commercial banks—showing the parent company still relies heavily on external lenders. The finance arm’s deposit rates exceeded commercial bank averages, giving Northern Rare Earth a yield advantage.

Why This Matters for the West

The report illustrates how Chinese state-linked conglomerates use group finance companies to manage liquidity, reduce reliance on outside banks, and protect strategic industries like rare earths. Northern Rare Earth’s choice to hold nearly two-thirds of its deposits with an affiliated finance company highlights Beijing’s preference for internal capital loops—practices that limit transparency for foreign investors and regulators.

The absence of reported risk events reinforces how China continues to insulate its rare-earth champions from the financial shocks that could otherwise ripple into global supply chains.

Disclaimer: This article is based on disclosures from Chinese state-owned entities. All financial figures and risk assessments should be independently verified.

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