CHINA PRESS: FXWW

From the FXWW Chatroom: The Chengdu Branch of Shanghai Pudong Development Bank was fined CNY462 last week by China’s banking regulator for illegally loaning as much as CNY77.5 billion to shell companies as cover-ups for its non-performing loans, Shanghai Securities News reported over the weekend. Top management associated with the scandal were fined and charged, as well as barred for life from working in banking, while 195 lower-level executives were disciplined, it said. Pudong Bank said in an exchange filing that the fine’s impact is immaterial to the bank’s operations. ***Comment: Chinese commercial banks, under regulatory pressure to reduce high NPL ratios, lent recklessly to SOEs. These loans increased the risk of defaults and made it harder for private companies to obtain capital.
CHINA PRESS: China is clamping down on the use of local government funding vehicles (LGFVs), the 21st Century Business Herald reported Monday. The central government is enforcing debt swaps or separating LGFVs to independent companies to reveal invisible debt held by local authorities. The process of regulating LGFVs is slow and difficult given that it ties to the local economies and that it gets implicit guarantee from local governments, it said. ***COMMENT: LGFVS were was created to help local governments meet targets. Local officials are pressured by evaluations from central government. Irregularities presented by LGFVs therefore cannot be eliminated without overhauling the fiscal structure. These on-again and off-again approaches will not resolve the issue.
CHINA PRESS: The debt ratios of SOEs and local governments need to be closely watched, Li Yang, a researcher with the Chinese Academy of Social Science and advisor to China’s leadership, said in a forum at the Renmin University on Sunday. With China experiencing slower growth, excess production capacity and a difficult investment environment, rising leverage ratios, debt and non-performing loans are posing more risks, Li said. China’s financial system is marked by that borrowers need.

View the latest market information in the FXWW Chatroom with a free trial.

Leave a Reply

Your email address will not be published.