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Hypocrisy mars RMB devaluation debate

Author: Stephen Olson, Hinrich Foundation The verdict on China’s recent currency devaluations differs depending on who you listen to. To some, the devaluations are either...

Banks struggle to hit lending goal

Significant challenges remain for the banking industry to reach the annual credit growth target this year, despite certain improvement in lending situation, State...

Can Internationalization of the Renminbi Succeed where Internationalization of the Yen Failed?

See original here: Can Internationalization of the Renminbi Succeed where Internationalization of the Yen Failed? The political unrest in the last quarter of 2009 will...

“Made in China” No More

Chinese companies are taking advantage of the EU debt crisis to make headway into Europe, targeting key sectors and regions, including shipping and ports in Greece, auto manufacturing in Eastern Europe, and banking and finance in London. By relocating production to Europe and securing a “Made in Europe” label, some firms hope to boost their reputations. Car manufacturer Great Wall Motors opened an assembly line in Bulgaria to produce cars exclusively for Europe. China wants to invest in “sectors that will boost its foreign trade, but also facilitate its international trade in general,” says Hervé Solignac Lecomte, head of international trade at HSBC France as reported by Anne Villechenon in the Guardian. Europeans could be more willing to sell assets to Chinese investors – and the spread of operations to Europe could also decentralize Chinese corporate decision-making. – YaleGlobal Chinese manufacturers look to escape image problem by qualifying for coveted Made in Europe labelAnne VillechenonThe Guardian, 15 May 2012This article originally appeared in Le Monde.      Rights:© 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved.

Fitch downgrades Hungary to junk status

Budapest: Fitch Ratings downgraded Hungary's credit grade to junk status on Friday, citing a standoff between the country and the European Union and the International Monetary Fund over rescue loans. Fitch, which followed similar moves from Moody's and S&P, kept a negative outlook, indicating a more than a 50 per cent chance for another downgrade within the next two years

China’s Real Estate Bubble May Have Just Popped

China’s real estate scene is reminiscent of the 2007 US market: developers are slashing prices and infuriating owners who paid top yuan for properties. Problems in the real estate market are extending into steel, banking, mining and other sectors. Vacant developments are numerous because wealthy Chinese savers have few alternatives for investing growing wealth. “Beijing's response to the global financial crisis added jet fuel to the fire,” writes Patrick Chovanec for Foreign Affairs, arguing that investors, not urban residents contributed to the bubble. “To maintain GDP growth of nearly ten percent during a massive downturn in global demand, China's leaders engineered a lending boom that expanded the country's money supply by roughly two-thirds.” Developers, after ignoring warnings to ease up on capacity, have urged the government to lift restrictions on owning multiple homes. By letting the bubble pop, the government could instantly create affordable housing for less affluent Chinese. – YaleGlobal Speculation, excess inventory, vacant developments, price reductions – a host of factors are set to undermine China’s real estate market and economic growth Patrick Chovanec Foreign Affairs, 26 December 2011 Rights:Copyright © 2002-2011 by the Council on Foreign Relations, Inc.

SBV sets stricter rules on new bank establishment

The statements made by the State Bank of Vietnam recently make people understand that while Vietnam is still busy “putting the banking system in order,” it would nearly say “no” to the establishment of any new banks.

Indian banks healthy but stress signals showing

The past three months have been tough for Indian banking. High interest rates and threats of a global recession have taken their toll on bank stocks.

The NSE banking index fell 15 per cent compared with the Nifty’s 11 per cent slide in the past three months. Indian banks, ironically, have never been in a better state of health in the past 10 years. A recent study by Boston Consulting Group (BCG) found that bad loans fell from a peak of 11.4 per cent in 2001 to just 2.4 per cent in 2010, showing the efficiency of management of capital. In fact, Indian banks have been performing better in controlling defaults with only 0.6 per cent of loans handed out last year turning sticky, compared to 1 per cent in the US and China. Indian banks also have a cost-to-income ratio of 47 per cent, which is lower than Germany, France and the US.

The main reason for the robustness was the banks’ focus on return on investment, cost-to-income ratios and the efficient use of technology.

BCG expects that by 2025 the Indian banking sector will be the third largest in the world on assets, behind China and the US. Indian banks have brought bad loans down to 2.4 percent over 10 years, but now they need to be careful. Forbes India But now stress signals are showing up.

The Reserve Bank of India expects non-performing assets (NPA) to inch up to 2.9 per cent during 2011. IDFC Securities, a broking firm, recently said at least 17 per cent of loans are stressed and some could go bad.

Total bank credit to the industrial sector stands at about Rs 17,60,600 crore. “Credit to power and infrastructure sectors has grown 40 per cent in the past four years and the proportion of the same has gone up to 14 per cent in terms of total credit offtake, which has created additional risks to the banking segment,” says Ajay Parmar, head of institutional research at Emkay Global.

State-owned banks have a higher allocation to small industries, which could get hurt early if there is an industrial slowdown. Additionally, the central bank’s battle with persistent inflation is raising the cost of money, pressuring net interest margins that are expected to continue to narrow for at least another two years.

But no one is pressing the panic button yet because there is no dearth of liquidity in the system.

Says Rajeev Thakkar, CEO, Parag Parikh Financial Advisory Services, “If margins are high then NPAs are not a cause for concern...

There is a difficulty in the system but we are certainly not into recessionary territory.” (Follow IBNLive.com on Facebook , on Twitter , on YouTube , and on Google+ for updates that you can share with your friends.) Thank you.

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