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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             copy from chinadaily

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.

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.

By Dong Zhixin (chinadaily.com.cn)
Updated: 2008-03-06 12:17

China’s top banker refused to rule out the possibility of further interest rate hikes on Thursday, while pledging to be cautious in using this monetary tool.”There is definitely room for further increases, in my personal opinion,” said Zhou Xiaochuan, governor of the People’s Bank of China, the central bank, at a press conference on the sidelines of the annual session of the country’s top legislature.

However, regulators have to weigh the advantages against the disadvantages before taking such a move, Zhou said. “The timing and the scale of the adjustment are also an art.”

Zhou admitted that the recent aggressive rate cuts in the United States are restricting his agency’s ability in raising the cost of capital.

The opposite direction in interest rate movements in the two countries is expected to attract more hot money into China, complicating the country’s efforts to keep its economy from overheating and tame inflation.

“This is just part of the influences, and we also have domestic considerations,” he said, pointing to the boost of domestic consumption and the development of the capital market.

China has been endeavoring to spur the Chinese to spend more so as to reduce its over-reliance on investment and exports for economic growth.

“We have to consider and measure the impact of interest rate changes on domestic demand,” Zhou said, adding that regulators hope to cut savings rate, which stays high in the country. In theory, a lower interest rate will help push the consumers to increase consumption.

Interest rate policies will also affect the development of the capital market, as well as the proportion of direct financing, Zhou said.

When the interest rates are low, the citizens tend to look to the capital market for attractive products, thus helping adjust the proportion between direct and indirect financing, Zhou said. “The country should redouble its efforts in developing the capital market and encourage direct financing.”

Premier Wen Jiabao pledged to follow a tight monetary policy on Wednesday in his policy speech to keep inflation in check and prevent the economy from overheating.

The Consumer Price Index, a barometer of inflation, jumped an 11-year high of 7.1 percent in January on rocketing food prices. The world’s fourth largest economy expanded 11.4 percent last year, the sixth consecutive year of double-digit growth.

In response, the central bank raised interest rates six times and the bank reserve requirement 11 times since the start of 2007.
 

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.”

 

A top Chinese official yesterday said the United States should make its export policy more open to help balance the Sino-US trade gap.

The strict regulation on hi-tech exports from the US is one of the reasons for the country’s trade deficit with China, Wang Chao, assistant minister of commerce, said at the US-China Clean Energy Dialogue. Expanded hi-tech exports from the US will ease the gap, he added.

Yao Wenping, vice-president of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME), agreed. “Every year, many Chinese enterprises want to import hi-tech materials and equipment from the US, but encounter obstacles.”

The US complains about the huge trade deficit with China – in the first 11 months of 2007, it amounted to $142.22 billion. This has put pressure on China to take various measures, such as appreciating the yuan, to narrow the gap.

China has taken a series of measures, such as reducing and abolishing its export tax rebates for many products, to dampen exports and encourage imports.

Analysts said if the US is more open in its hi-tech export policy, things will improve. The US, instead, alleges that China might have “dual uses” for some hi-tech products and made a new rule in June that expanded licensing requirements for a longer list of items.

Analysts say the US overreacted since many of the products that China wants are simply for civilian purposes.

Clean energy could be a field where the US can make more efforts to ease its export controls to help balance Sino-US trade and promote healthy economic and trade exchanges between the two sides, said CCCME’s Yao. “Products in this field are purely for civilian use.”

Every year Chinese enterprises import huge amounts of solar-energy materials, equipment and technologies from the US, she said.

China’s solar photovoltaic companies have grown fast in recent years. There are 50 to 60 such firms, mostly privately owned, said Yao.

Yao estimated that this year, the value of clean-energy technology procurement and cooperation between Chinese and US firms could amount to $10 billion if “they did not encounter obstacles”. It could be even higher.

She said China is ready to introduce more clean-energy technologies and products from the US. In the upcoming China Import and Export Fair to be held in April, the organizers are planning to open a special area for exhibiting new clean-energy technologies and equipment from the US.

A US delegation led by David Bohigian, US assistant secretary of commerce, is now visiting Beijing. It is composed of some 17 US energy enterprises and is scheduled to meet China’s National Development and Reform Commission officials today before they leave for Guangzhou in Guangdong Province and Hong Kong.

The government will introduce a range of temporary price-intervention measures in a bid to stabilize the cost of daily necessities, a State Council executive meeting said yesterday.

According to the meeting, large-scale producers of such products must seek government approval before imposing any price increases.

Similarly, large-scale wholesalers and retailers that want to raise prices will first have to notify the government.

The State Council has not yet specified what the products are, or when the measures will be introduced.

The country’s Price Law stipulates that the State Council can temporarily freeze prices or centralize the price-setting power on part of or the whole market if the prices undergo strong fluctuations.

The prices of the country’s major foods, including grain, pork and cooking oil, surged last year, lifting the consumer price index to an 11-year high of 6.9 percent in November, well above the government’s target of 3 percent.

Despite a secure supply, China still faces the prospect of further price hikes as the global prices of crude oil and food surge, the State Council said.

It also ordered a halt to any price rises in crude oil, natural gas, electricity, water, heating, public transportation, education and healthcare.

Pledging to crack down on market manipulation or hoarding, the central government will also arrange special campaigns to oversee local authorities in stabilizing prices ahead of the festive season.

According to the State Council, attempts are also being made to revise a regulation to curb illegal price fixing, which will impose heavier punishments on industry associations found guilty of manipulation.

Cheng Guoqiang, deputy director of the Market Economy Institute with the Development and Research Center of the State Council said: “The measures aim to regulate market order, stabilize price expectations and ensure a healthy and normal market.”

“Due to its wide coverage, price rises in the daily necessities market, especially the grain sector, might magnify and spread to other sectors,” he said.

“Therefore stable prices in these sectors are key for the stability of the market as a whole.”

Cheng said the measures are systematic, taken after key government meetings held last year set the tone of “preventing economic growth from evolving from rapid to overheating and preventing price hike shifts from going from structural to inflationary”.