Bloomberg News | Jul 23, 2010
Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, according to a person with knowledge of data collected by the nation’s regulator. About half of all loans need to be serviced by secondary sources including guarantors because the ventures can’t generate sufficient revenue, the person said, declining to be identified because the information is confidential. The China Banking Regulatory Commission has told banks to write off non-performing project loans by the end of this year, the person said.
Commission Chairman Liu Mingkang said this week borrowing by the so-called local government financing vehicles may threaten the banking industry. The nation’s five-largest banks, including Agricultural Bank of China Ltd., plan to raise as much as $53.5 billion to replenish capital after the sector extended a record $1.4 trillion in credit last year. Local governments set up the financing vehicles to fund projects such as highways and airports due to limits on their ability to directly borrow money. The central government this year restricted borrowing on concern money isn’t being used for viable projects. Only 27 percent of the loans to the financing vehicles can be repaid in full by cash generated by the projects they funded, the person said. Calls to the banking regulator’s press office in Beijing after business hours weren’t unanswered.
Bloomberg | January 7, 2010 | 09:33 EST
Stocks fell around the world, with the MSCI Emerging Markets Index falling the most in three weeks, and metals dropped as China moved to curb lending. The yen slid after Japan’s finance minister said he would welcome a weaker currency, while a rising dollar extended losses in commodities. The MSCI emerging markets gauge declined 0.8 percent at 9:32 a.m. in New York, led by China as the Shanghai Composite Index plunged 1.9 percent, the biggest decrease among major benchmark indexes tracked by Bloomberg. The Standard & Poor’s 500 Index lost 0.3 percent, retreating from its highest level since October 2008. Copper declined from a 16-month high and oil snapped its longest rally since 1996. The yen weakened against all of the 16 most-traded currencies, while the dollar climbed against 14 of 16.
Central bankers in China, the engine of the global economic recovery, sold three-month bills at a higher interest rate for the first time in 19 weeks after saying their 2010 focus is controlling record loan growth. The Federal Reserve said in the minutes of its latest meeting that the U.S. economic recovery might require additional stimulus measures to be sustained. “Growth will probably slow this year as tight credit will damp the demand side,” said Zhang Ling, who helps oversee $7.2 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “That will dash investors’ hope of another year of fast growth.” The MSCI World Index of 23 developed nations’ stocks slipped 0.2 percent. European and Asian stocks declined from the highest levels in more than 15 months. Continue reading