China's banking system shows disturbing, U.S.-style cracks

[RamboLiberal]

Source: USA Today

HONG KONG — Off-balance-sheet liabilities. Bad mortgage loans. Uncertain growth prospects.

These issues, which nearly toppled the U.S. banking industry and triggered the financial meltdown, are increasingly threatening the stability of Chinese banks.

Last week, a slew of Chinese banks — including Industrial & Commercial Bank of China, Bank of China and Agricultural Bank of China — reported strong profits. ICBC, the country's largest, earned $12.4 billion in the first six months of the year, above analysts' expectations. But rather than providing reassurance about banks' health, the positive numbers are fanning fears of what's yet to come.

"I expect housing prices to take a turn later this year, and when they do, then you'll start to see the effect on (Chinese) banks," says Dragon Yongjun Tang, an assistant finance professor at the University of Hong Kong. "Some of the weaker local banks may need to be restructured."


Read more: http://www.usatoday.com/money/world/2010-08-30-chinesebanks30_ST_N.htm

[Skink]

1. They are facing a commercial real estate crisis.

nobody to lease to. dormant shopping malls and skyscrappers.

[mike r]

2. The housing construction orgy is unsustainable

just like in Japan or the U.S.

[xchrom]

3. recommend

[Common Sense Party]

4. Are they going to blame it all on Wall Street, too?

[eggplant]

5. does this mean we can buy back our debt cheap?

that would be pretty cool.

[Fearless]

6. China puts on a good face, but in the end they are subject to the same problems

The rest of the world has.

[NewJeffCT]

7. However, China has a fiscal surplus, unlike the US & Europe

who have trillions in debt.

[bossy22]

8. china is in debt as well

they have a trade surplus- not a fiscal surplus. The two things are actually quite different. China has a national debt of about 25% of its GDP- which is about the average for developing countries.

Developed countries are always extended more "credit" than developing countries and thats why they tend to have larger debt levels. Remember, incurring debt is not a bad thing if it is done responsibily and for the right reasons. You should not be using debt to pay for Operating expenses but for capital project it is perfectly fine to use debt- i dont know many people who buy houses or cars without using some form of financing and debt use. So why should the govt not be allowed to do the same? Why does the govt need to pay for a new office building all at once when it plans on using the office building for 50 years? why can't they just pay for it over the course of the buildings life?

[mike r]

9. Actually China just had a US$170.0 billion fiscal surplus for January-July

http://www.morningstar.com/1/3/220346-china-january-july-fiscal-revenue-25-7-fiscal-surplus-cny1-15-trillion.html

But it looks like they do run a yearly deficit of ~3% of GPD.

[NewJeffCT]

11. I agree that some debt is fine

and, Republicans and the Blue Dogs are blowing smoke out their asses with this faux concern about the deficit. However, just the fact that the US debt is over $10 trillion gives us less room the maneuver than if our debt was $1 trillion.

[DeSwiss]

14. "Remember, incurring debt is not a bad thing if it is done responsibily and for the right reasons."

[NickB79]

10. The cynical side of me thinks the Chinese government wants an economic crisis

They could use it as an excuse to clamp down on increasing social unrest, problems brought about by the runaway capitalism they've unleashed that threatens the Communist Party's way of life.

[benld74]

12. Per MBA class 10 years ago,,,- What the Chinese do best,,,

Watch and learn from other countries entering China as business entities.
Adopt ALL business entity procedures
MAKE their own version of the Business Entity
Force out the original foreign business entity in one manner or another.

[conspirator]

13. Either in China or elsewhere PONZI SCHEMES cannot last too long n/t