OPINION> Commentary
|
OPINION> Commentary
|
|
A resilience test
(China Daily)
Updated: 2009-01-09 07:39 Chunky sales of Chinese bank shares not only highlighted foreign investors' difficulties to cope with the global financial crisis, but also put to the test domestic lenders' capability to ride out the ongoing economic slowdown. With the expiry of the lock-in period, large foreign investors like UBS and Bank of America have recently sold their stakes in Chinese banks to cash in their lucrative holdings. The fat profits they made, hundreds of millions of US dollars within just a few years, surely make them the envy of many investors at home and abroad. It would be too easy to see in this their smartness as investors. But their sales of Chinese bank shares, to a large extent, actually reflected their own problems for surviving the global financial crisis. In the face of an urgent need to reduce the fiscal pressure, it seems a hard but not so bad choice for them to put off, if not put an end to, their dreams of expansion in China. As for Chinese banks, these transactions and the prospect of more such sales may drive down their shares to affect investors' confidence in the country's banking industry.
Domestic banks have generally thrived well on the country's robust economic growth since big State banks were transformed into ingenious commercial lenders with the help of a number of strategic foreign investors just a few years ago. But there have always been suspicions that Chinese banks are yet to stand the test of time, tough times in particular. The rapid slowdown of the Chinese economy will provide a definitive test on Chinese banks' capacity of risk management and crisis control. Limited exposure to toxic financial derivatives has put Chinese banks in a better position than their foreign counterparts to weather the global financial crisis. Yet the ultimate test for Chinese banks is how they will keep the ratio of bad loans down while doing their bit to support the country's efforts to fight off the economic downturn. In this sense, there is no need to worry too much about foreign investors' decision to divest their stakes in Chinese lenders. Instead, the banking regulator will have to work even harder to keep a close eye on the overall quality of bank loans. Fears that there will not be enough buyers for Chinese bank shares will evaporate as long as domestic lenders can prove their resilience against the crisis. After all, compared with many foreign assets, these bank shares can be a good option for many institutional investors at home. (China Daily 01/09/2009 page8) |
