Written by Jeannette Di Louie, Assistant Editor
You’d think that with the current economic crisis and the reasons behind it, financial institutions would at least try to play it safe. But as we’ve already seen from our own banks and mortgage companies over the past few months, that just isn’t so. While I’ll lay a significant portion of the blame on the government for bullying them around since October, there were too many incidents of gross misspending, risk-taking and all around stupidity on the financials’ part to let them off the hook so easily… both before the bailouts and since.
Remember those California and Las Vegas retreats they were planning?
Yeah. I thought so. Enough said.
So since our own institutions don’t learn very easily from their mistakes, I suppose it would be a little hypocritical for us to point out China’s risky ventures. But let’s explore the subject anyway.
Under the various economic stimuli the Chinese government created, banks have lent 5.2 trillion yuan ($762bn) from just January through April of this year. And while a lot of that went towards infrastructure jobs backed by the administration, Fitch ratings agency point out that “this emphasis on short-term profit may be contributing to excessive risk-taking by banks, particularly in corporate lending, which could lead to material losses in these portfolios.”
So while China might still be enjoying strong growth compared to just about everybody else who’s economies are contracting, that doesn’t mean it should be… something that China might regret further down the road.
Jeannette Di Louie