Three reasons why China's banking system is fragile - Victor Shih

Victor Shih by Fantake via Flickr

Despite three trillion US dollar in foreign reserves, China's banking system is more fragile than you would think when you look at that figure only, tells Victor Shih at the Institute for New Economic Thinking. Much of China's wealth is concentrated with very few. (h/t Creditwritedowns.com)

Victor Shih is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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Stress tests but no stress for bank sector - Shaun Rein

Shaun Rein     by Fantake via Flickr

Bot real estate prices and A-shares in China keep on getting investors attention, but as the country prepares for stress tests of their banks, Shaun Rein expects the government will be able to channel fears about the debts of central and local governments, he tells Bloomberg TV.
Rein foresees a soft lending for the real estate as sales dropped 70 percent over the past few months, indicating consumers are not taking too high risks. Total government debts is at 42 percent of China's GDP, much less than in some of the developed countries, putting it in a good position to deal with those debts with huge problems for the banks. Rein expects no problems as China will expose its banks to the stress tests earlier conducted in the US and Europe.
More at Bloomberg.

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Shaun Rein is a speakers at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Where China is hiding its debts - Victor Shih

Victor Shih Fantake via Flickr

Professor Victor Shih from the Northwestern University is the main investigator, looking for China's sky high debts after its financial rescue operation. In Business Week Shih explains where China is hiding its debts, and why there might be more than even he can find, especially at the 8,000 local investment companies, who might have borrowed more than they can pay back.

Figuring out what projects the LICs have financed and how healthy they are is hard. Shih says LICs in the western city of Yinchuan, the capital of Ningxia autonomous region, have helped bankroll a building spree. New luxury villas and high-rise residential complexes, as well as a huge new soccer stadium, adorn the city. A science and technology center, a museum, and a library each occupy several football fields' worth of turf, while an almost-finished skyscraper resembles New York's Empire State Building. It's pretty ambitious for a region that depends on cash transfers from Beijing for 70 percent of its total revenues. Shih estimates Ningxia's debt at $15 billion—75 percent of the region's economy. "A soccer stadium in the middle of nowhere is not going to generate much cash flow," he says. "Without massive central government subsidies, I think many of these projects will not generate enough cash even to pay interest on their loans."

More in Business Week.

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Victor Shih is a speaker at the China Speakers Bureau. When you want to share his insights at your meeting or conference, do get in touch.

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Not bullish on AgBank - Shaun Rein

Shaun Rein     by Fantake via Flickr

Shaun Rein, managing director of the market research group CMR, might be in general optimistic about China's economic development, at CNBC he cautions against too many bears on the road for China's Agricultural Bank, also called AgBank or ABC. The bank performed poorly at its listing on Thursday at the Shanghai stock exchange. The bank is too much a political tool and might not help investors, says Rein.
Most of its customer'base are poor Chinese farmers, who might switch to more consumer-savvy banks like the China  Merchant Bank, when they actually start to make money in the decades to come. Also, of its customers currently already 90 percent is not satisfied about the banks performance.

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Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do let us know. 

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