Medium-sized banks boost industry

By Xu Shenglan (chinadaily.com.cn)
Updated: 2008-04-10 15:44

 

China’s banking industry was boosted over the past year amidst a booming economy and the capital market, with medium-sized banks achieving the highest growth, the China Business News quoted an analyst as saying on Wednesday.

 

Li Weiqi, a banking analyst from the Sinolink Securities, said annual reports released so far suggested that listed commercial bank profits increased 62.2 percent year-on-year in 2007. Profit of medium-sized banks, large banks and city-level lenders grew by 89.1 percent, 51.1 percent and 52.9 percent respectively.

 

Industrial Bank, China Merchants Bank, CITIC Bank, and Shenzhen Development Bank were among the fastest growing lenders, he said.

 

According to Li, the top three factors contributing to the growth of medium-sized banks are the growing scale of business, provision declines, and expansion of net interest margin; While large banks and city banks benefited most from net interest margin and scale growth respectively.

 

Meanwhile, a favorable business environment last year provided banks with ample capital and lucrative non-interest income. Therefore, rapidly growing banks in all business surely earned more, Li said.

 

Statistics shows that lenders with rapid growth in interest-bearing assets last year included CITIC Bank (43.5 percent), China Merchants Bank (40.3 percent), Industrial Bank (38 percent), and Shenzhen Development Bank (34.3 percent).

 

Li also noted that listed city banks underperformed last year in the bullish stock market. Geographically limited, these banks lagged far behind medium-sized ones in growth of broker deposits and commissions. In addition, a higher proportion of bonds in city banks’ assets also led to larger paper losses in financial statements, he said.

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HSBC launches private banking in China

(Agencies)

HSBC Holdings, Europe’s largest lender, launched private banking services in China on Monday as foreign banks including Citigroup target the country’s fast-growing market for services to wealthy clients.

 

Chinese regulators had given HSBC approval to offer private banking services in Shanghai, Beijing and the southern city of Guangzhou, the bank said.

 

It will target individuals with a minimum net worth of $10 million, it said, while the minimum initial deposit for an account will be $1 million.

 

HSBC and other foreign lenders are targeting China’s rapidly growing wealthy class, as full deregulation of the country’s banking industry has allowed them to conduct local-currency business with Chinese individuals.

 

“The creation of wealth in China is a unique phenomenon in that greater wealth is being generated by a relatively younger age group as compared to the rest of the world,” Monica Wong, HSBC private bank chief executive for Asia, said in a statement.

 

Annual economic growth of more than 10 percent has created more than $345,000-millionaires in mainland China, according to a Merrill Lynch report.

 

HSBC, which has set up a wholly owned China unit, posted more than $1 billion in pretax profit in China last year.

 

HSBC rivals CitiBank and Standard Chartered have already started private banking businesses in China, while Bank of East Asia has said it planned to launch such services in the second quarter.

 

Local banks, including Industrial and Commercial Bank of China and Bank of Communications , in which HSBC holds a stake, have also joined the competition to offer services for wealthy Chinese clients.

 

 

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             copy from chinadaily

 

Yuan breaks 7 mark against US dollar

(Xinhua)
Updated: 2008-04-10 09:51

 

China’s currency, the yuan, was set to trade at 6.992 yuan against the US dollar on Thursday, breaching the 7-yuan mark for the first time since the government unpegged it from the dollar in 2005.

Following an overnight fall of the dollar, the central parity rate of the yuan, or renminbi, gained 105 basis points to 6.992 yuan against the dollar on Thursday, according to the China Foreign Exchange Trading System.

Shen Minggao, an economist at Citigroup in Beijing, said that like many economists, he was not surprised to see the yuan to break the 7-yuan mark.

“It was quite natural,” he said, citing the dollar’s fall against other major currencies, especially the euro, since the second half of last year along with an unfolding US credit crisis plaguing the US economy.

The yuan has gained 4.47 percent this year based on Thursday’s trading price, or 15.99 percent since the new currency regime was imposed in July 2005.

The yuan’s gain amounted to 18.27 percent from 8.2765 yuan against the dollar before the new currency regime was adopted.

Zhuang Jian, a senior economist with the Asian Development Bank mission in China, also believed a weaker US dollar was the most direct factor behind the accelerated appreciation of the yuan.

The value of Chinese currency stayed above eight to the dollar for many years before the 2005 regime reform. The yuan broke the 8-yuan threshold on May 15, 2006.

Zhuang said the breakthrough was an indication of the country’s efforts to shift from a heavy reliance on exports and investment as well as to go after a more balanced trade structure.

The quickened pace had prompted many overseas banks to raise their forecast of the yuan’s 2008 annual gain against the dollar. Last month the Standard Chartered Bank revised its prediction from 9 percent to 15 percent.

However, economists agreed that the fast pace registered in the first quarter would probably not continue throughout the year.

“We do expect continued appreciation going forward, but not quite at the breakneck pace of the first quarter,” the Switzerland-based UBS Investment Bank said in a report released on Wednesday.

The bank said the “stabilization of the US dollar in 2008″ and “greater signs of stress in the export sector” due to the US and global slowing would help moderate the pace.

Some economists even expected that the yuan may not unilaterally rise against the dollar for the rest of the year.

Shen Minggao said the appreciation pressure on the yuan would ease and the yuan may even depreciate against the dollar, once the dollar became stronger.

Tan Yaling, a research analyst with the Bank of China, also expected the dollar to rebound in the second half, and said the 2008 US presidential election could be a plus to making the dollar stronger.

She continued to anticipate that the yuan would continue to appreciate in the first half, but would report falls against the dollar from time to time in the second half as the dollar rebounded.

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BOC vows better services for small corporate customers

(

Xinhua)
Updated: 2008-03-15 22:10

Bank of China (BOC), the country’s second largest lender, said it would improve financial services for its small- and medium-sized corporate customers in 2008, a bank source told Xinhua on Saturday.

The bank’s total number of small- and medium-sized corporate customers was nearly 30,000 in 2007.

“The bank has launched a tailor-made service process and risk control system for these customers and arranged experts to provide a wide array of services for them,” BOC said.

Previously, it was more difficult for those small companies to get loans from banks compared with large enterprises. However, experts hold the financial services market for small companies was a lucrative one with great growth momentum.

The China Banking Regulatory Commission urged on Friday that financial institutions should provide better services to the country’s small corporate customers this year.

The industry watchdog said although the country would continue a stringent monetary policy, the growth of loans to small enterprises this year would not be lower than the average loan growth rate to all customers.

In February, the outstanding value of all renminbi loans of financial institutions hit 27.22 trillion yuan (3.84 trillion US dollars), up 15.73 percent compared with the same period last year, the People’s Bank of China reported on Wednesday.

The growth was 1.01 percentage points lower than January, the central bank said.

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Gold futures add luster to Shanghai

By Wang Lan (China Daily)
Updated: 2008-01-10 09:01

The debut of gold futures trading on the Shanghai Futures Exchange yesterday marked a milestone in the development of country’s financial market and the city as an international center

At the ceremony to mark the opening of trading, Shang Fulin, chairman of the China Securities Regulatory Commission, said the introduction of gold futures contracts “will help expand the scope of the futures market which is playing an increasingly important role in stabilizing the financial markets and serving national economic growth”.

Gold futures trading is also widely seen to add to the strength of Shanghai as a financial center of the nation.

Feng Guoqin, deputy mayor of Shanghai, said: “Gold futures trading reflects the quickening pace of the development of Shanghai as an international financial center.”

In yesterday’s trading, the most actively traded contract for delivery in June settled at 224.74 yuan ($30.9) per gram, up 6.34 percent from the opening price. And the contract for delivery in December was 229.93 yuan ($31.6) per gram, up 8.86 percent. The total turnover of all contracts amounted to 27.3 billion yuan ($3.75 billion).

The first deal was closed between China National Gold Group and Jiangxi Copper Company. Jiangxi Copper bought from China National Gold 1 contract in a 1,000 gram denomination.

Wang Chiwei, vice-president of Jiangxi Copper, said he had been hoping for a long time to be able to hedge against price risks by trading gold futures in the domestic market.

“As a company operating gold processing business, Jiangxi Copper needs a hedging tool to avoid risks resulting from price swings to ensure steady profits.”

According to Wang, it usually takes four months for a processor to refine copper concentrates into gold products for delivery. The low processing fee, at $5 per ounce, can easily be wiped out by a small movement in the price of gold in the wrong direction.

“Without an effective hedging tool, the price movements at any time of the 4-month work cycle will bite off a big chunk of the refining fee,” Wang added. “The judicious use of gold futures in the domestic market trading in renminbi can enable Chinese enterprises to increase their competitive edge in the global market.”

When the global economy was strong, currencies were stable and inflation was low – as in the past several years – the gold market was in the doldrums and prices of the metal hardly moved.

Not anymore. The worsening US credit crisis, coupled with the weakening US dollar and escalating oil prices, have driven gold prices to unprecedented highs. Last month, the international price of gold surged an aggregate 11.3 percent. The most actively traded contract on New York Mercantile Exchange (NYMEX) for delivery in February hit a record high of $894.4 per ounce in yesterday’s pit trading.

“The launch of gold futures is very timely,” Shi said. “When gold prices are touching record high levels, gold producers are in much more need to hedge against high volatility resulting from sudden changes in market sentiment in these highly uncertain times.”

Traders and industrial experts believe that the expected rise in gold output as well as consumption by China this year would help the newly established futures market gain influence in setting global prices in the foreseeable future.

Jeffrey Christian, president of CPM Group, a leading global commodities research and consulting company based in New York, told China Daily: “China will be the largest producer of gold from mines, a major refiner, and a major user in fabricated jewelry. It will also become a major investment market. It will gain influence on gold prices.

“Our expectation is that trading will start off relatively modestly in terms of volume, but could build later,” said Christian.

“Chinese market participants should remember that when US and Japanese gold futures trading began, in the 1970s and 1980s, their volumes were initially low, but later they became major markets. The same could happen, and may well happen, with Chinese markets.”

 

 

China agrees to open up financial service industry

(Xinhua)
Updated: 2007-12-13 16:30

BEIJING — China and the United States have agreed upon specific steps for foreign companies to enter China’s financial service industry following two-day high-level economic dialogues.

China said it would complete a study of foreign equity participation in the banking sector by the end of 2008 and make relevant policy recommendations.

Foreign-invested companies including banks will be allowed to issue RMB denominated stocks and bonds, while mutual funds administered by Chinese banks will be allowed to invest in the US stock market, according to a statement from the US government.

This has created new opportunities for US firms in a variety of securities business, said the statement.

But China will resume licensing of new joint-venture securities companies and allow foreign securities firms to expand their operations in China to include brokerage, proprietary trading and fund management.

Several foreign firms, including some US firms, are already in advanced stages of establishing new joint ventures, says the statement, without elaborating.

Shortly before the dialogue, China raised the quota for qualified foreign institutional investors, which allow foreign mutual funds to invest in China’s domestic stock market, from 10 billion US dollars to 30 billion US dollars.

U.S. Treasury Secretary Henry Paulson called this progress “moderate”, affirming that opening China’s financial markets to foreign competition strengthens the financial backbone of the Chinese economy. “It’s critical to China’s goals of spreading the benefits of growth to all Chinese people,” he said.

A statement from the Chinese side said the policies should be carried out in accordance with relevant prudential regulations.

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China, US work out new tasks after SED

(Xinhua)
Updated: 2007-12-13 16:07

US Treasury Secretary Henry Paulson shakes hands with Chinese Vice-Premier Wu Yi (L) during the opening of The Third Strategic Economic Dialogue in Xianghe, near Beijing, December 12, 2007.  [Agencies] 

– Further intensify dialogue and exchanges in the areas of product and consumer safety, including food, feed, and drug and medical products, through new and existing bilateral cooperation mechanisms.

– Conduct extensive cooperation over a ten-year period to address energy and the environment, advance technological innovation, adoption of highly-efficient, clean energy technology and technology in addressing climate change, and promote the sustainability of natural resources. A working group will be started in order to start planning as soon as possible.

– Meet early next year and work together to jointly promote the negotiation in the WTO on the reduction or, as appropriate, the elimination of tariffs and non-tariff barriers to environmental goods and services to achieve results as soon as possible, recognizing the urgency of environmental challenges.

– Expand cooperation on development of a detailed plan to gradually reduce the sulfur content in fuels to 50 ppm or lower and introduce corresponding advanced vehicle pollution control technology, for incorporation into China’s 12th Five Year Plan (2011-2015).

– Strengthen cooperation on construction and management of strategic oil stocks through the exchanges of information and technologies, as well as training, including cooperation with the International Energy Agency.

– Begin a high-level exchange of investment policies, practices, and climates. Intensify ongoing discussions regarding the prospects for negotiating a Bilateral Investment Treaty.

– Continue consultations in a cooperative manner on China achieving market economy status. Continue cooperation through the High Technology and Strategic Trade Working Group under the Joint Commission on Commerce and Trade by positively implementing “Guidelines for U.S.-China High  Technology and Strategic Trade Development” and taking appropriate  constructive measures and working out an action plan to expand and facilitate bilateral high-tech and strategic trade. Relevant departments of the two sides have agreed to meet or hold a digital video conference (DVC) in the field of rules of origin.

– Explore the scope of respective international obligations on transparency. Continue to exchange information on reviewing and responding to comments received during the rulemaking process. Establish a communication mechanism to exchange information regularly on the conditions, procedures and timeframes for granting administrative licenses in areas of the Chinese market of interest to the United States and areas of the  U.S. market to China.

                                                                                                                        source from Chinadaily

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Yuan gains vs greenback after US interest rate cut

By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-11-01 13:05

China’s currency rose to a new record against the greenback on Thursday after the US Federal Reserve cut the key interest rate the previous day.

Before Thursday’s trading started, the People’s Bank of China (PBOC) set the yuan central parity rate at 7.4552 relative to the US dollar. The new midpoint marked an appreciation of 0.6 percent in the past seven trading days and a 4.6 percent rise since the beginning of the year.

The hefty rise of 140 basis points over the previous session came after the Fed slashed the federal funds rate, an overnight lending rate between banks, by 25 basis points on Wednesday to prevent a slowdown in the economy.

“The rate cut further reduces the appeal of dollars and will facilitate the capital flow to emerging markets, including China,” Professor Guo Tianyong of the Central University of Finance and Economics (CUFE) told chinadaily.com.cn Thursday morning.

The weakening dollar makes China’s yuan and other world major currencies face rising pressure for appreciation.

However, China’s exchange rate formation system is still a managed floating one, Guo said, adding that the central bank has to take various factors into consideration when deciding whether to allow a faster appreciation in the coming days.

In addition to the exchange rate pressure, China faces other fallouts from the Fed move. Before Wednesday, there was wild speculation in China that the PBOC was mulling a sixth interest rate hike this year to keep the world’s fastest growing major economy from overheating.

The country’s gross domestic product grew 11.5 percent year-on-year in the third quarter, while inflation jumped 6.2 percent in September, the National Bureau of Statistics said last week.

However, “the Fed move increases the difficulty for the central bank [to raise interest rates],” said Professor Song Guoqing of Peking University. Song anticipates another rate increase this year.

Guo of CUFE shared Song’s view, saying the pressure on the central bank is growing.

But Guo deemed that the central bank has the room to raise rates, as there is still a difference between benchmark interest rates in China and the United States.

The current one-year deposit rate in China stands at 3.87 percent while the US federal funds rate is 4.50 percent after Wednesday’s cut.

Moreover, the interest spread is not the major concern for the central bank, Guo said, adding that the domestic inflationary level and asset prices are more important factors to decide policy changes.

The US rate cut also gave rise to mounting worries in China about increasing liquidity, which has pushed up housing and equity prices in the country.

Guo downplayed those concerns, saying the interest spread is not the major target of outside capital. “Whether the liquidity will increase depends mainly on the expectation of rising prices in the housing and equity market, and the renminbi appreciation.”

Zuo Xiaolei, chief economist of Galaxy Securities pointed to the pressure of increasing liquidity as capital inflow might increase, and is urging the PBOC to tighten the curb on potential hot money influx.

The Fed should have been more cautious when deciding on the rate cut, said the female economist, citing inflation and red-hot crude oil prices in the global market.

“It [the Fed] should not just consider Wall Street,” Zuo said. “All factors should be taken into account.”

In an online vote on the Wall Street Journal website, by 14:29 Thursday (Beijing Time) only 33 percent of those surveyed thought the Fed had made the right move, while 49 percent believed the rate should be left unchanged.

 

BOC posts 40% leap in profits in 1st nine months

(Xinhua)
Updated: 2007-11-01 14:33

The Bank of China (BOC), one of the country’s four largest State-owned commercial banks, said its after-tax profits rose by 40 percent to 45.5 billion yuan (US$6.1 billion) in the first nine months of the year based on the international accounting rules.

The bank contributed the leap in profits to the rapid increase in net interest income and earnings from intermediary services.

Its net income from interest rose 26.7 percent year on year to 110.6 billion yuan.

The commission charges from distribution and entrusting of mutual funds and corporate intermediary businesses expanded by 88.9 percent to 18.9 billion yuan in the January-September period.

The bank said its income from other than interest rose 32.7 percent to 26.7 billion yuan to account for nearly 20 percent of its total turnover.

It said the non-performing loan ratio continued to drop, without revealing the exact figure.
The lender said its business turnover per capita reached 319,400 yuan in the first three quarters, up 34.9 percent from the same period last year, leading all the other domestic commercial banks.

By September 30, the bank’s total assets hit above six trillion yuan, said the bank.

The rival Industrial and Commercial Bank of China (ICBC), the country’s largest lender, had reported a 66 percent year-on-year increase in its net profit in the first nine months of this year.

The BOC also revealed it held about US$7.95 billion of debt obligations related to the US sub-prime mortgage by the end of September, already down by 1.7 billion from the end of June.

It had booked another 322 million U.S. dollars of devalue provision for the risky debt obligations in the past three months, and the balance of the provision stood at US$321 million by the end of September.

Share prices of the Bank of China on the Shanghai bourse fell to 7.14 yuan on Wednesday’s closing.

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China inaugurates first bank-invested trust company

(Xinhua)
Updated: 2007-10-29 06:39

Wuhan — China’s first bank-invested trust company is officially set up in Wuhan, capital of central China’s Hubei Province, on Sunday.

The new trust company is held by the Bank of Communications (BOCOM), China’s fifth largest lender, and Hubei provincial finance department, which control 85 percent and 15 percent of the total shares respectively.

The BOCOM invested 1.2 billion yuan (about US$160m) to buy the shares of the Hubei international trust and investment company, the first commercial bank investment in a trust company approved by the China Banking Regulatory Commission.

Jin Dajian, chairman of the new company named “jiaoyin-guoxin”, or BOCOM-International Trust, said the company would focus on “professional wealth management”.

Jin called the establishment of the new trust company “a breakthrough for China’s trust industry”, given that the country’s law on commercial banks, effective since 1995, did not allow commercial banks to make trust investment.

The regulation was not lifted until the end of last year, when the China Banking Regulatory Commission encouraged financial institutions, including commercial banks, to acquire trust companies.

The BOCOM, a large state-owned commercial bank, was established in 1908, and the Hubei international trust investment company was founded as a non-banking financial institution under Hubei provincial government in 1981.

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