October 01, 2010
China Moves Towards Credit Default Swaps
Two significant reforms underway this week in China: Beijing approved expanding Shanghai's interbank market to a "National Interbank Loan Trading System" with 21 big banks signed up for interbank lending and word in Lujiazui is that real Credit Default Swaps are coming. And Reuters reports today that short-term commercial paper will be traded in the interbank market creating a new vehicle for short term financing and away from dependence on bank lending.
Bank lending has expanded enormously in China in answer to the Panic of '08. Today over 45 trillion Yuan or $6.8 trillion US dollars in bank lending are outstanding a number not far off that in the USA....
Labels: banking, financial news, money, panic of 2008
September 30, 2010
China Relaxes Rules on Gold Imports
According to Reuters, the World Gold Council says China's central bank announced rules in August that will allow Chinese more banks to import and export directly on the global market. As China is slowly building its central bank holding of gold this means that China may soon play an important role in the global trade for bullion....
Labels: banking, currencies, financial news, gold
September 09, 2010
Deutsche Bank Enters ChongQing
German financial powerhaus Deutsche Bank was given permission to open a branch bank by the Chongqing municipality's banking regulators and authority. Over ten foreign banks have already set up shop in Chongqing - China's most dynamic city - including HSBC, Bank of East Asia, ABN-AMRO, and ANZ of Australia. Chongqing recently declared financial services to be a "pillar" industry of the giant independent municipality's economy and a focus of investment and innovation over the long term...
Labels: banking, financial news, globalization
March 30, 2010
Shanghai To Launch Yuan Funds, REITs
Before the Panic of '08 China's State Council created the little-known National Office of Financial 30 to direct a series of financial liberalizations in Chinese capital markets. The financial crisis and Beijing's mammoth stimulus spending delayed many of the reforms. But word is Shanghai is on the cusp of getting approval for two major initiatives -- launching foreign Yuan private equity funds and Real Estate Investment Trusts (REITs).
A "trial plan for participation of foreign investment in Renminbi investment funds" is close to approval. This will allow certain foreign investors, most likely big institutions such as the Carlyle Group, to invest in Chinese private equity funds via a mechanism that would grant a quota of Yuan directly to the foreign investor.
Property developers in Pudong (Shanghai) and Tianjin appear to the driving force behind establishing REITs in mainland China. Details for Chinese REITs are still being sorted out but word from Yan Qingmin, head of the Shanghai office of the China Banking Regulatory Commission, is that REITs should get the green light in the 1st half of this year. Rumour is Citic Securities, the brokerage of Citic Group - China's premier transnational corporation - may be the first to establish a REIT.
The intent of the Financial 30 is to expand private sector access in bank lending and to channel investment to Chinese small and medium enterprises as well as other breakthrough type reforms. The ShenZhen GEM board, for example, grew out of the program....
Labels: banking, finance, financial news, reform
March 12, 2010
Reunification Watch: Taiwan Approves Financial Integration
Taiwan's Financial Supervisory Commission - the Taipei government's financial regulator - approved direct investment by mainland Chinese banks, brokerages, and insurance companies in Taiwan. Several Chinese financial businesses are interested in setting up branches on Taiwan and investing in Taiwan companies. Bank of China and Bank of Communications are known to seek expansion to Taiwan. Taiwan news sources say the Commission still needs to inform the Executive Yuan and Taiwan's parliament but the new rules could be in place as soon as next week....
Labels: banking, financial news, reunification, taiwan
February 12, 2010
World Markets Slide: Blame China
The consenus view of mainstream media today is that worldwide stocks and futures markets sank in reaction to the Chinese central bank raising its reserve requirement a half a percentage point. But contrary to what most reports claim the increased requirement for banks in China was not a surprise. Further an increase in the People's Bank of China benchmark interest rate, a much more important change, is expected sometime this year possibly in the second half as long as the Chinese economy continues strong growth. Money managers already factored in these increases in their predictions and analyst advice sometime ago.
More likely world markets reacted to news from the EU that its anemic recovery is faltering. Official statistics from the EU show that 4th Quarter 2009 GDP barely increased 0.1% and industrial production fell almost -2%. Add the ongoing sovereign debt problems in Greece and other EU members and surely world markets are more rattled by events in the EU than anything happening in China.....
More likely world markets reacted to news from the EU that its anemic recovery is faltering. Official statistics from the EU show that 4th Quarter 2009 GDP barely increased 0.1% and industrial production fell almost -2%. Add the ongoing sovereign debt problems in Greece and other EU members and surely world markets are more rattled by events in the EU than anything happening in China.....
Labels: banking, financial crisis, global economy, stock market
May 21, 2009
Fitch Ratings to China: You're Black
Anglo-American credit rating agency Fitch Ratings says China could face a banking crisis (via BBC News video) as Chinese banks are lending agreessively in response to Beijing's huge stimulus investing. The risks to this writer seem wildely out of place. Analysts closer to China such as those at Morgan Stanley in Hong Kong believe economic recovery is underway in China and real.
15 years ago and more China's potential was belittled by agencies such as Fitch and Moody's due to the so-called "non-performing loan" problem.
Fact is today the Chinese banking sector is not impaired. But US banks are in meltdown and agencies such as Fitch Ratings played a large and perhaps direct part in bringing about the Panic of '08 and the current global crisis....
Labels: banking, panic of 2008
March 17, 2009
China Bank Regulator to Allow M&A Financing
The China Banking Regulatory Commission will allow commercial banks to extend loans for mergers and acquistions in an important rule to facilitate the "reinvigoration" in major Chinese economic sectors. The policy of reinvigoration is a change to Beijing's huge $4 trillion Yuan stimulus effort and revealed in detail at the recently concluded National People's Congress.
The intent is to reduce the problem of excess production capacity in China and thus try to control supply versus demand. Infrastructure spending that could eventually accomodate greater demand will be avoided in favor of "soft" investment in social services (although high speed rail projects appear safe). One of the goals is to remake all major industrial sectors into oligarchies of big globally competitive corporations by shutting down or absorbing backward and smaller producers...
Labels: banking, panic of 2008
March 06, 2009
China Central Bank Says Currency Policy "Needs No Changes"
In response to a reporter's question at a confab at the sidelines of this year's National People's Congress, Chinese Central Banker Zhou Xiaochuan said Beijing's policy on Renminbi "needs no changes". When pressed Zhou said:
"The question should be raised to some countries where the financial crisis originated from: what's going to happen eventually on your side?" We have to make multiple plans and analyze various scenarios since there is obviously great uncertainty on their side..."
Labels: banking, currencies, panic of 2008, renminbi, yuan
February 06, 2009
Former Number 2 China Securities Regulator Charged in Corruption Probe
Wang Yi, was Vice President of China Development Bank until last June when he was "detained" in a corruption investigation. Earlier Wang was Vice Chairman of the China Securities Regulatory Commission in the years before the first big Shanghai bubble. He is accused of taking 10 million Yuan in bribes and other crimes. The Communist Party's corruption probe appears to be intensifying...
Labels: banking, chinese stocks
December 23, 2008
China Bank Rates Cut Again
The People's Bank of China cut interest rates 0.27% today but the expected move was not enough to excite equity markets in Shanghai (the Shanghai Composite Index is back down below 2,000) or Hong Kong.
In related news, Beijing is committed to do more to shore up the property market - believed to be the key sector of China's economy right now and critical to avoiding a hard landing of the Chinese economy is a robust property market. Beijing will fund a massive house building campaign - 1.3 million homes for low-income families - similar in concept to Uncle Sam's house building program in the late 1940s. (Source: Bloomberg)
Labels: banking, china property, panic of 2008
December 04, 2008
China Non-Performing Loans at $185 billion
Months into the Panic of '08 emerges again the meme that China's bad bank loans (AFP) or non-performing loans or NPL will sink the Chinese economy and doom any investor. This is an old line and was possibly relevant at the beginning of 2006 but not now.
By way of comparison, the US banking industry average of non-performing loans to total assets stood at 2.65% at the end of 3Q (September 30, 2008) a substantial increase from the historical trend. If you use data from the Fed (2006 was the most solid I could find) that figure stands around $309 billion. The US Government has committed trillions in liabilities to solve its financial crisis. Beijing is still sitting on the world's biggest heap of dollar bills. I don't see how the non-performing loans in China can be that serious a problem by comparison.
Labels: banking, panic of 2008
November 26, 2008
China Rate Cut Boosts Commodities
The Chinese central bank cut interest rates over 1% today in a surprisingly strong move that partly accounted for rescuing the price of oil, copper, and other traded commodities. In related news Bosai Minerals, a privately owned Chinese mining conglomerate, announced a deal to build a $1 billion (US Dollars) aluminum oxide plant in Guyana.
Labels: banking, foreign trade, money, panic of 2008
September 25, 2008
Hong Kong Financial Virus Erupts
While Washingon and New York scramble to avoid a repeat of October '87 or even '29 on Wall Street, the Hong Kong rumour mill is in full gear and could yet trigger a massive slide.
Yesterday, rumours circulated that Bank of East Asia was failing and an old style bank run was on with photos and headlines splashed acrossed world media. Today, the South China Morning Post reported that Beijing's bank regulator (China Banking Regulatory Commission) told domestic banks to stop lending to US financial institutions, a report denied by the agency. If American politicians don't declare victory soon I expect the Hong Kong viral panic may wield its own special damage.
Labels: banking, financial crisis, hong kong, panic of 2008
February 22, 2008
Taiwan Reunification Watch - Update
A big significant step taken in the Beijing - Taipei thaw reported today by the London Financial Times. Fubon Bank of Taiwan will be allowed to buy a 20% stake of Xiamen Commercial Bank (of Xiamen on the mainland side of the Taiwan straits) through its Hong Kong susidiary with the Hong Kong Monetary Authority acting as go-between.
This is yet another example of how Beijing will use Hong Kong as intermediary (if not overt example) for its absorption of Taiwan. Gaze at the geography of greater Xiamen in the map above - could it be another Hong Kong in the making? Nothing prevents it but outdated (and non-Chinese) ideology...
Labels: banking, china, fubon, hong kong, reunification, taiwan, xiamen
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