To: Joe S Pack who wrote (40989 ) 11/6/2003 1:09:56 PM From: AC Flyer Read Replies (1) | Respond to >>He does n't make nonsensical statements<<CHINA'S BANKS: THE ONLY TWO THINGS YOU NEED TO KNOW There are two things to know about the banking system in China. First, the major state banks, the so-called Big Four, are insolvent. Second, the effort to bail them out is not working. Everything else is simply detail. The crisis in the Chinese banking system is perhaps the most serious in the world today. The cause is not hard to understand. The Big Four, over the course of just a decade, have squandered the savings of a great people at the direction of Beijing. Senior technocrats tried to reform state-owned enterprises by replacing direct subsidies from the central treasury with loans from the four largest banks (Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China). The theory was sound: Wean sick SOEs off grants and make them self-sufficient. In practice, the plan was a disaster: State enterprises knew they didn't have to pay back the banks. So they didn't. In an economic system divorced from economic reality, banks effectively became gift givers. They essentially vacuumed cash from small savers and disgorged it onto state enterprises at the direction of thousands of officials. The process was easy, quick and absurd. china.jamestown.org
