Three Chinese banks are the world’s most profitable
Jul-09-2012 By : agxadmin
China’s three biggest lenders – Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), and Bank of China (BOC) – are the world’s most profitable banks, according to The Banker. ICBC led for the second successive year with pretax earnings of USD43.2 billion, followed by CCB, which delivered a USD34.8 billion profit, and BOC with earnings of USD26.8 billion. “Chinese banks appear to have a vast cushion of profits with which to tackle problem loans as they arise,” the magazine said. Four Chinese banks were in the top 10 in terms of tier 1 capital. The Banker also noted that Chinese lenders’ assets are just 13% of the global total, compared with their profits accounting for 30%. Their capital-to-assets ratios are significantly lower than for banks in other major emerging markets.
PBOC cut interest rates for second time in four weeks
By : agxadmin
The People’s Bank of China (PBOC) cut interest rates for the second time in just four weeks. The surprise reduction is sure to stoke fears that China’s second-quarter economic growth rate – due to be announced this week – will be even weaker than the 7.5% or so that analysts were expecting. The benchmark one-year savings rate fell by 0.25 percentage points to 3%, while the key lending rate was cut by a slightly larger 0.31 percentage points to 6%. On top of that, the central bank said that from now on banks would be allowed to make loans at rates as low as 70% of the benchmark lending rate. As a result, the minimum one-year lending rate has been reduced to just 4.2%, from 5.9% at the beginning of June. The margin between what banks pay on their deposits and what they get on their loans has now fallen by half to just 1.2 percentage points. In the near term that’s bound to hurt the share prices of China’s main banks, which have already fallen heavily since early April, when Premier Wen Jiabao signaled a tougher policy stance towards the banking sector, declaring “our banks are profiting too easily”. The asymmetric interest rate cut is expected to make little difference to banks’ margins, however. A couple of years ago, Chinese banks typically made two-thirds of all their loans either at or slightly below the benchmark lending rate, but now banks only make a third of their loans at or below the benchmark rate. Two-thirds are made at interest rates above the benchmark. Some analysts say the latest interest rate cut may do little or nothing to boost China’s economic growth rate. Many economist say this month’s action won’t be enough, and the central bank will be forced to cut rates at least two more times this year, as well as further relax the reserve requirement ratio (RRR). Both measures effectively free up credit in the financial system so banks can grant more loans.
Foreign exchange rules for FDI to be simplified
By : agxadmin
The State Administration of Foreign Exchange (SAFE) is planning to simplify the foreign exchange rules pertaining to foreign direct investment accounts. The plan is another step in the country’s efforts to make the yuan fully convertible on the capital account and to eventually make it a global currency. The acts of opening or adding to foreign exchange accounts for the purpose of foreign direct investment (FDI) will no longer be subject to regulatory examinations. The same will be true for transfers between different foreign exchange accounts. Examinations will no longer be conducted on reinvestments of profits generated by foreign companies in China. There will also be a simplification of the procedures foreign investors must follow when buying Chinese equities in the over-the-counter market and applying for capital verification for investments in Sino-foreign joint ventures. “The move will eliminate a lot of procedures and make foreign direct investment simpler in China,” said Wang Jianhui, Chief Economist with Southwest Securities Co, an investment bank. The report said the procedures for foreign direct investment should be simplified for investments whose purpose is verified and which do not involve speculative capital. Guo Shuqing, Chairman of China Securities Regulatory Commission (CSRC), said that none of the 40 items in China’s capital account is totally unconvertible. To avoid financial instability, China’s capital markets are largely off-limits to foreign investors. Only selected foreign fund managers can invest in China through the Qualified Foreign Institutional Investor (QFII) program. In total, USD80 billion in QFII has been approved. An RQFII program — the “R” standing for renminbi — followed this year. It allows off-shore yuan, accrued mostly through yuan-denominated trade settlements, to flow back to China.
Chinese FDI falls for first time in 9 years
By : agxadmin
Foreign direct investment (FDI) from China fell for the first time in nine years in 2011. According to a report by the United Nations Conference on Trade and Development (UNCTAD), outgoing FDI from China declined 5.4% to USD65.12 billion last year – the first drop since an increase in expansion overseas in 2003. Francis Cheung at brokerage firm CLSA said the data was unsurprising. “Since Greece threatened to break from the euro zone last June, pricing negotiations of any merger and acquisition have become immensely difficult,” Cheung said. “If I were an executive from a corporation in one of those troubled regions, I would also hold off until better times.” Cheung expected China’s FDI outflow to rebound in the next few months as projects restarted amid better external economic conditions. China remained the world’s most favored destination for FDI, with inflows rising 8% to USD124 billion last year, and for the first time investment in services surpassing that of manufacturing. UNCTAD said the amount of capital inflow to the financial sector would rise in the coming years as foreign banks including HSBC and Citigroup expanded their presence in China.
China could miss its trade growth target
By : agxadmin
Vice Premier Wang Qishan has warned China may miss its target for trade growth this year, underscoring growing concern about the slowing global economy. He said the global economic situation remained severe, with many uncertainties, so it was “an arduous task” to ensure China’s trade growth target for the whole of this year could be achieved. Last month, a Ministry of Commerce Spokesman had voiced confidence the country would be able to achieve its objective of 10% growth in trade for the year, barring any catastrophe. British bank Barclays recently lowered its forecast for China’s export growth to 8% from 10%, due to a weakening external outlook. During the first half of the year, container throughput at Shanghai, the world’s busiest port, grew 3.6% to 15.86 million TEU, slower than the 10.5% growth in the first half of last year, according to official Chinese data. Willy Lin, Chairman of the Hong Kong Shippers’ Council said orders placed with Hong Kong exporters have fallen 20% to 30% this year. In Dongguan, a leading Pearl River Delta manufacturing center, the number of Hong Kong companies has fallen to 6,500 from 9,000 in 2008, Lin added. “This indicates Chinese exports are really dropping.”
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