Date
21 October 2017
Jiang Jianqing
Jiang Jianqing

The Big Picture: CHALLENGES ON BANKS

Chinese banks are expected to see three main challenges in 2014, namely the tapering of the US quantitative easing program, rising capital requirements and intensifying competition amid the rise of internet finance service providers, said Jiang Jianqing {姜建清}, chairman of Industrial and Commercial Bank of China (01398.HK, 601398.CN).

It is unclear how the United States, Europe and emerging markets will react to the Federal Reserve’s exit from its debt purchase plan, Jiang said at the World Economic Forum in Davos, Switzerland, on Saturday. Global investors still have mixed views on the pace of recovery of major economies, he said. 

Some Chinese banks may find it difficult to fulfill the capital and liquidity management requirements set by the regulator, Jiang said. Also, banks are facing rising challenge from the internet sector, he said. 

With these challenges, banks should continue to improve its services while reducing systemic risks. In fact, China’s shadow banking problem is overstated, compared with Japan’s 240 percent debt-to-gross domestic product ratio, Jiang said, adding that the public should not be too bearish about the issue. 

Chinese banks should go out to acquire more overseas assets this year to benefit from the attractive valuation of foreign companies, he said. Also, they should increase their investments in internet businesses as more internet finance service providers enter the market. 

This is not the first time that Jiang talked about the challenges posed by internet finance. In August last year, he said ICBC was planning to launch an innovative internet finance platform after several technology companies started offering internet finance services with their customer databases.

However, observers noted that Jiang failed to mention another big challenge for 2014, interest rate liberalization, which may profoundly affect the operations of the big four banks. If the deposit rate cap rises, banks will receive less interest income and be forced to seek more non-interest income sources, they said. If this happens, large banks’ advantage over the smaller players will gradually diminish.

CDB issued 996.8 bln yuan for urbanization in 2013, paper says

China Development Bank Corp. (CDB) issued new loans worth 996.8 billion yuan (US$164.83 billion) in 2013 for the country’s urbanization program, accounting for two-thirds of its total renminbi lending for the year, Shanghai Securities News reported Monday, citing data released by the bank. In addition, the bank issued 106 billion yuan of loans for the rehabilitation of shantytowns and more than 100 billion yuan for rail projects. After the loans, the bank’s total assets as of end-2013 were worth more than 8 trillion yuan, with outstanding loans at 7.04 trillion yuan and non-performing loan ratio at 0.48 percent, the report said, without providing comparative figures.

Support policies for IC board industry on the anvil, paper says

The Chinese government is said to have completed the drafting of a new round of support policies for the integrated circuit board industry, with an emphasis on supporting the design and manufacturing of such boards, the China Securities Journal reported Monday, citing sources from within the industry. The support policies could be in place for at least 10 years with investment likely to exceed 500 billion yuan (US$82.72 billion), it said. The Ministry of Industry and Information Technology had earlier announced plans to set up a 30 billion yuan integrated board equity investment fund in Beijing, in order to nurture flagship enterprises and facilitate overseas acquisitions, the report noted.

– Contact HKEJ at [email protected]

JP/CG

 

 

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