Best of the Week
Most Popular
1.Gold Price Crash Through Key Support, Crude Oil in Freefall - Clive_Maund
2.Marc Faber Warns Japan's Bond-Buying Program is a Ponzi Scheme - Bloomberg
3.Silver Price and Powerful Forces - DeviantInvestor
4.Stocks Bear Market Catastrophe as Stocks Flash Crash to New All Time Highs - Nadeem_Walayat
5.Marc Faber Warns Not to Hold Any Gold in the U.S. - GoldCore
6.U.S. Housing Market San Francisco at Critical Mass - Harry_Dent
7.Global Scramble For Silver - Coins “Hard To Get,” “Premiums Likely To Jump” - GoldCore
8.Major World Stock Market Indices Analysis: SPY, QQQ, DAX, FTSE, CAC, HSI - Michael_Noonan
9.Japan's kaput?! - Axel_Merk
10.Tesco Empire Strikes Back, £5 off £40 Discount Voucher Spend Explained, Exclusions Warning! - Nadeem_Walayat
Last 5 days
Two Biotech Stocks Set to Double on One Powerful Catalyst - 21st Nov 14
Swiss Gold Poll Likely Tighter Than Polls Suggest - 21st Nov 14
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14
Bitcoin Price Did We Just See an Important Slump? - 18th Nov 14
How to Profit From Oversold Crude Oil Price - 18th Nov 14
Stock Valuations Outrunning Profits Growth - And the Band Played On - 18th Nov 14
ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme" - 18th Nov 14
Gold, Silver, Crude and S&P Ending Wedge Patterns - 18th Nov 14
How High Could USD/JPY Go? - 18th Nov 14
On Obama and the Nature of Failed Presidencies - 18th Nov 14
Globalism Free Trade Immigration Connection - 18th Nov 14
An Epiphany From Hell - Buy Gold and Silver - 18th Nov 14
Too Difficult to Get a U.S. Home Loan - 18th Nov 14
Has the Gold Bear Trap Been Set - 18th Nov 14
Gold Price and Miners Soar on Huge Volume - 17th Nov 14
Cameron Says Second Global Economic Crash is Loomin, Japan in Recession - 17th Nov 14
How to Play the Stock Market 2014 Year-End Rally - 17th Nov 14
What The Fed Has Wrought, Who Needs Wage Earners Anyway? - 17th Nov 14
Stock Market Indexes Fluctuate Along Record Levels - Will Uptrend Continue? - 17th Nov 14
Stock Market Trend Deceleration Tends To Precede Corrections - 17th Nov 14
Stocks Bull Market Set to Continue After Consolidation - 17th Nov 14
The World Is Run By Fools, And We Let Them - 17th Nov 14
Gold Price Golden Bottom? - 17th Nov 14
Gold Dragons Grand Strategy - 16th Nov 14
Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - 16th Nov 14
Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - 16th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

Chinese Banks Quasi Government Institutions

Politics / Banksters Sep 04, 2013 - 12:33 PM GMT

By: BATR

Politics

When is a bank an appendage of state? In China, the incorporation of commercial banking under the auspice of governmental policy is virtually indistinguishable. Philosophically, any government should have control of their currency and structure the precepts of banking and lending system. Capitalist banking would command a greater pragmatic function if competition among banks was based upon free enterprise. However, under the central banking scheme governments regulate banks, but are creatures of fractional reserve debt money issued by central bank parentage. The Chinese way has included a touch of mystery when analyzed within the context of western international banking.


How did a communist economic model transform into a partner of the globalist banksters cabal? Setting the political questions aside, the business of building an economy requires the acquisition of money on a scale that most societies are unable to access. The difference in the Great Wall nation became the favorite police state pattern for the corporatists to move their manufacturing facilities that grew a trading surplus, which accrued huge sums. China alone has amassed official reserves of US$3.2 trillion.

Translate this occurrence into a banking advantage would have you believe that Forbes’ reporting is correct. Written earlier this year, Red Banks Rising: Will China Become The World's Banker?, has a Sino banking buy spree in full motion.

"In February China’s central bank issued a three-step plan that would tear down the barriers surrounding China’s big banks. Hopes quickly emerged that China’s banks could become international players much like China’s industrial companies, providing capital to a global economy that could use it. "Chinese banks are well positioned to follow Chinese companies abroad and provide financing; the question is whether they will also provide services to foreign companies," says Ben Simpfendorfer, a Hong Kong-based consultant. "China would benefit from exporting its cash, and the rest of the world would benefit, especially foreign buyers of Chinese goods."

For the most part the only Chinese financial firms putting serious money to work internationally are driven by Beijing’s politics. China Development Bank, a policy institution, has done some big deals in Africa and lent $10 billion to Petroleo Brasileiro, Brazil’s state-run oil company. There have been signs, however, that China’s big commercial banks are preparing to go global, too. ICBC has been opening and buying branches from New York to the Netherlands and last year paid $600 million for assets of Standard Bank in Argentina. It is now hiring scores of bankers in Brazil. "The Chinese banks will play a larger role internationally than they have in the past," says John Weinshank, the corporate finance chief at China Construction Bank’s New York branch, which built a $2 billion loan book in two years. "That’s the plan. I can assure you we will be expanding in the Americas over the next two years."

A second establishment flagship publisher, The Economist presents a viewpoint that a Giant reality-check, is on the horizon, Four of the world’s biggest lenders must face some nasty truths.

"CHINA’S banks are not real banks," says Andrew Rothman of CLSA, a broker recently acquired by China’s CITIC Securities. The country’s biggest financial institutions are so closely held by the state that they are, in effect, arms of the treasury. Cosseted by rules that protect them from competition, they deliver huge profits in good times: bank profits as a share of China’s economic output equalled nearly 3% last year, whereas the highest ratio achieved in recent decades by American banks was only 1% of GDP (in 2006). In bad times the state is there to clean up, just as it did during a surge in dud loans in 1990s.

But the bargain that has driven China’s "Big Four" banks to the top of the global league tables is breaking down. Profitable though they are now, another wave of non-performing loans will soon hit them. As the Chinese economy rebalances, the state is less willing than it was in the past to pour credit into state-owned enterprises (SOEs) at the expense of households and private firms. Mr Rothman’s epithet will not hold forever. China’s big banks are slowly becoming real institutions."

While the Chinese banks are adapting to international commerce circumstances, the fact that Chinese yuan does not have a reserve currency function has allowed the state-controlled regime to enjoy foreign exchange benefits that other countries resent. The day is coming, when fundamental rescaling of the world banking system, will alter the way that Chinese banks operate. The accounting firm of Ernest and Young presents the following view in a report, Challenges for central banks: wider powers, greater restraints.

"Emerging countries’ greater importance to the world economy has generated criticism of Western monetary policy and led to calls for some kind of international monetary reform. One of the strongest proponents of such reform is China. On the one hand, the capital restrictions and the state-controlled finance system enabled the Chinese authorities to partly shield the country from the worst effects of the financial crisis in 2008 and 2009 and to engineer a remarkable, if inflationary, stimulus. On the other hand, these same factors mean that China, in the words of Jin Liqun, Chairman of the Supervisory Board of China’s sovereign fund, China Investment Corporation, is the only one of the six biggest world economies that does not have its own international currency."

Having it their way, while everyone else is shackled to floating currency convertibility, means that China’s state protecting racket will break down if a reserve currency role is eventually implemented. Since at this stage it is impossible to separate state control from business risk lending, the future of the top ten Chinese Banks are dependent upon the way the financial community navigates within the treacherous waters of the China Sea.

If the prototype of Chinese banking, with a reciprocal relation under the wing of state direction forecasts international banking, just what will the banksters do with the loss of their preeminence. If the past is a reliable gauge, bidding against the moneychangers is a tall order.

James Hall – September 4, 2013

Source : http://www.batr.org/negotium/090413.html

Discuss or comment about this essay on the BATR Forum

http://www.batr.org

"Many seek to become a Syndicated Columnist, while the few strive to be a Vindicated Publisher"

© 2013 Copyright BATR - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

BATR Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014