Giant on the move
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.
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.