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Strategies & Market Trends : HONG KONG
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To: MikeM54321 who wrote (1691)5/26/1998 10:47:00 PM
From: Ron Bower   of 2951
 
Mike,

I wish I had posted it, but it wasn't relevant to the posts being made at the time.

I recently read and article about bank policy changes by the PRC. They had imposed tight 'sink or swim' restrictions on bank lending policies, requiring them to foreclose on a high percentage of non-performing loans. The article states that the policy has now loosened and for banks to restructure loans if the companies could present a debt retirement plan that seemed feasible. The PRC will advance low interest loans to the banks to keep them solvent during a transition period. The company performance will be closely monitored and those not performing to the payment schedule may be forced to liquidate, merge, or otherwise restructure.

I believe they realized how extensive the unemployment would be if the kept the original policies. A weak employer was preferable to a bankrupt former employer.

They do have a problem that I haven't seen mentioned. China needs to lower loan rates to stimulate the economy. Interest rates for Rmb deposits are 5.25%. For $US, 5%. They cannot lower rates for depositors of yuan because of this. If they can't lower depositor rates, they can't lower loan rates. The alternative of yuan devaluation has been rejected as it would cause a withdrawal panic with depositors trying to convert yuan to $US or other currencies.

The only solutions that seem feasible at this time is to expand the already liberal tax and other benefits for exporting companies.

For what it's worth,
Ron
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