Thursday, April 30, 2009

Chinese Banking...

The Chinese banking system is an arm of its government (as opposed to our situation where D.C. is the mid-atlantic division of "Bank Of CitiJPGoldman").

Full article here.

April 30 (Bloomberg) -- Just when the world is beginning to appreciate China’s biggest banks, unencumbered by Wall Street assets of no discernible value and fortified by record first- quarter lending, some analysts say it’s too good to be true.

While Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd., three of the world’s four largest banks by market value, led an increase in lending focused on investments in railways, roads and ports, similar state-directed loans caused bad debts to snowball in the 1990s. The resulting rescue cost $650 billion and took 10 years.

“We suspect some of the banks may have compromised their risk-management and risk-aversion attitude to meet targets and government expectations,” said Wen Chunling, a Beijing-based analyst at Fitch Ratings. “That will lead to a rebound in non- performing loans in the next few years.”

Chinese banks tripled first-quarter lending to $670 billion as part of a government stimulus package designed to help the economy recover from its slowest growth in almost a decade.