huangthomas

Big Losses Are Hidden on China's Bank Balance Sheets

Yes, there is absolutely no transparency in western investment banks. Lehman Brothers sold micro-bonds to small detail investors in Hong Kong and Asia right up to its bankruptcy.

Big Losses Are Hidden on China's Bank Balance Sheets

I would not worry about SOE. Chinese central government would never allowed them to fail and their monopolistic or oligopolistic status will be well protected.

At the provincial level, the story can be different. Sometimes ago, two of the financial institutions in Guandon province were on the verge of default. Hank Paulson assisted Wang Qishan, who is currently the vice premier, to save one and allow the other to fail. That was decades ago. I don't think it will ever be repeated.

Big Losses Are Hidden on China's Bank Balance Sheets

The $600 billion stimulus package announced last November, the central government in Beijing required that the state (provincial) government be responsible for 70% of the funding. How this is going to work in The Federation of the States of America?

Chinese "investors" like to "gamble" their money in the stock market and investment in bonds has never been popular. Some of states (province) don't even have legal right to issue bonds! How are they going to fund that 70% of the stimulus package 4 trillion yuan in size? From November 2008 to February 2009, there's intense negotiation between the central government and the states(provinces). In March 2009 there was an explosive lending by the large SOE banks. You know where the stimulus money is from. The Interest paid by the banks to depositors is fixed by the central bank at 2%. It is a very inexpensive source of funding.

The official figure of Chinese national debt is 16.5% of GDP. If the above mentioned bank borrowing, which is part of the national debt by any sense of the words, is added, the national debt of China is close to 40 to 50% of GDP. China has a surplus of current account on foreign trading, but the national budget is in the deficit spending mode.

The rest of the story is self evident. Please do not look at China through American glasses. Japan has national debt at 200% of GDP, Germany 80% and USA, YOU GUESS! China is in great shape in economy. Spare yourself of worrying about Chinese economy or banks.

Asia's 10 Most Profitable Companies

Most are Chinese state owned major monopolies (oil, petrochemical, telecommunication, and banks). These are components of FXI. It is nice to know that all major Chinese banks are doing well and are bright spots in Chinese economy.

Just as a reminder, the HS in HSBC stand for Hongkong and Shanghai.