Changing China
Giant on the move
Interest rate barometer
Chinese banking regulators should monitor more closely the lending activities of underground banks, where interest rates react more quickly to changing economic conditions than do rigid state-set interest rates.
“Historically, these interest rates change more rapidly to changes in market liquidity,” Gao Shanwen, Essence Securities’ chief economist, said at the Reuters China Investment Summit.
“They are an important barometer that should be monitored more closely,” he said.
According to market lore, some of these illegal banks are formed by bank employees or others with access to bank funds, which are then lent outside of official channels, said Gao.
Such banks flourish along China’s east coast, where there are a multitude of private firms that need cash to run their operations but have traditionally been shunned by the country’s large state-run banks, which prefer making loans to large state-run firms.
Monitoring the illegal lending, which plays an important role in China’s largely state-run banking system, would be relatively easy, because there are established brokers, who regularly advertise their services through mass distribution of cell phone alerts.
Don’t bank on mortgage spike
By Michael Wei
Don’t count on a recent spike in home loans to greatly improve earnings at Chinese banks. That’s because they are still a relatively small part of overall lending.
“It is not expected to have a huge impact on banks’ overall earnings,” Gao Shanwen, Essence Securities’ chief economist said at the Reuters China Investment Summit, speaking about the rise in mortgage lending. Mortages make up only about 10 percent of total lending at present.
New lending in China has surged in recent months, and some of that has gone into the recovering housing market. Mortgages are considered quality loans in China because of their longer term and relatively higher margins.
Gao said that such loans are one of the key areas that commercial banks have been pushing during a lending surge in the first half of the year under a loose monetary policy.
Photo Caption: Gao Shanwen, chief economist at Essence Securities, attends the Reuters China Investment Summit in Beijing. REUTERS/Christina Hu
Hello my dear friend (Mr. Gao Shanwen),It is good to read about you from such pages.Keep it up!!!With Respect,Zafar
