China's banking sector remains largely healthy, and market-oriented
reform will be continued prudently, finance officials said.
Banks are also seeking
opportunities to further expand business overseas as the yuan increasingly
becomes a global currency.
"The banking system's risk
is under control and the non-performing loan ratio, 0.97 per cent, is
low," Shang Fulin, chairman of the China Banking Regulatory Commission,
said at a news conference on Sunday during the 18th National Congress of the
Communist Party of China.
Bank lending is not concentrated
on any high-risk investment projects, and most of the loans have mortgage
guarantees, Shang said.
Sound earnings and the prevention
of risk is the basis for domestic banks, he said.
Total debts will rise from 191
per cent of GDP at the end of 2011 to 206 per cent by the end of this year,
according to a report by Standard Chartered Bank.
The report also said that the
country will have public debt at 58 per cent of GDP by the end of 2012.
Consumer debt will stand at 19
per cent of GDP, and corporate debt at 128 per cent.
Zhou Xiaochuan, governor of the
People's Bank of China, urged alertness to potential risks, especially shadow
banking, as banks diversify financial products and services.
Shadow banking, as the name
suggests, mainly refers to credit access outside the regular system. In China,
it usually involves wealth management products, underground finance and
off-balance-sheet lending.
"Shadow banking is
inevitable when banks are developing their business," Zhou said. "But
there are fewer problems here than the shadow banking sector in some developed
countries that have been hit by the global financial crisis."
In an article for China Daily
published in October, Xiao Gang, chairman of Bank of China, said that shadow
banking was like a Ponzi scheme.
A Ponzi scheme is a fraudulent
investment operation that pays returns to investors from their own money or the
money paid by subsequent investors.
Chinese banks are also priming
themselves to steadily expand international business as the yuan becomes more
of a global currency.
Industrial and Commercial Bank of
China plans to increase the number of international branches as it focuses on
mergers and acquisitions to become a multinational group, Jiang Jianqing, the
bank's chairman said. The lender is the world's largest in terms of market
value.
"The growth in the overseas
market is even faster than domestic business," Jiang said. The bank, he
said, has earned US$864 million from its overseas operations in the first half
of this year.
As Chinese banks expand overseas,
the central bank is pushing direct transactions between the yuan and other
currencies to facilitate cross-border trade and investment.
The Reserve Bank of Australia is
in currency talks with the central bank to start direct trade between the
Australia dollar and the yuan, "which is a good thing and the two central
banks will fully support it", Zhou said.
According to the Society for
Worldwide Interbank Financial Telecommunication, the international payment
platform, the number of countries and regions processing yuan payments grew to
91 in June from 65 a year earlier, while institutions processing such payments
increased to 983 from 617 during the same period.
Hong Kong contributed around 80
per cent of yuan payments in the first eight months of 2012.
An HSBC survey showed that 77 per
cent of Chinese companies expected one-third of all Chinese trade to be
conducted in yuan by 2015, and 30 per cent plan to use the currency for
investment-related purposes in the next 12 months.
Chen Jia and Wang
Xiaotian
Business & Investment Opportunities
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