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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4702)	4/12/2005 12:46:58 PM
From: RealMuLan	Respond to of 6370

Economist warns of financial crisis www.chinaview.cn 2005-04-12 16:07:30 BEIJING, April 12 (Xinhuanet) -- Some experts have warned that China is likely to suffer a severe financial crisis in 20 years unless measures are taken, according to the Beijing-based newspaper Economic Reference. The huge amount of non-performing loans of China's major commercial banks increases the danger of panic bank withdrawals, the newspaper quoted Wu Jinglian, a renowned Chinese economist as saying. Although China's Big Four state-owned banks, the bedrock of the country's financial system, have been doing their utmost to clear away bad loans and streamline their operation, their non-performing loan ratio still stood at an average of 15.6 percent by the end of last year, the China Banking Regulatory Commission (CBRC) reported. Wu warned against the financial risks accumulated in the sluggish stock markets. Despite China's rapid economic development, the Shanghai Composite Index, which covers yuan-denominated A shares and foreign-currency B shares, slumped to 1172.57 points on March 30, the lowest point since May 19, 1999. Xie Yehua, professor of the Chinese People's University, said when the interest rate fluctuates, the rocketing banking loans to the real estate and automobile industry may worsen the financial situation in the country. China's interest rate system has become more flexible recently.China ended the favorable interest rates for private housing loanslast month to prevent housing bubble and curb the soaring housing prices. As the country is pushing forward the reform on state-owned enterprises (SOEs), more SOEs will go bankrupt and their non-performing debts will turn into non-performing loans of commercialbanks, Xie told the Economic Reference. The Chinese government in 1999 founded four companies to clear bad assets left by the four state-owned commercial banks, having spent 112.7 billion yuan (13.6 billion US dollars) in the year 2002 alone. Nevertheless, the non-performing loans of state-owned commercial banks still totaled 1.56 trillion yuan by the end of September 2004, according to figures from the National Bureau of Statistics. Chinese banks, facing heated competition with foreign-funded banks after China's accession to the World Trade Organization, aremore willing to increase their loan services in the profitable housing industry, Prof. Huang Yanfen from the Chinese People's University said. Most Chinese real estate development companies only have limited fund and are greatly dependent on loans from banks, so if the real estate bubbles explode, these loans will quickly become bad debts, she said. According to a report from the central bank, the ratio of credit loans to the housing industry has been rising remarkably since 2000. In 2000 real estate loans only accounted for 6 percent of total credit loans, while in 2003 the figure rose to 21 percent. Wu suggested that effective alert mechanisms be established to prevent crisis from happening, and the country continues to boost its reform on current financial systems, according to the newspaper. Enditem Storyhttp://news.xinhuanet.com/english/2005-04/12/content_2819153.htm