As the country "based on the expansion of domestic demand to maintain steady and fast economic growth" as a target for next year's economic work, China's commercial banks are speeding up the pace of expansion of lending. It is said that some banks began to loan officer to issue index rigidly require them within a certain time to be let out a certain amount of loan.
It let a faint smell of a new round of bad assets.
It should be acknowledged that relied on banks to increase lending rates to provide more liquidity to the market be a direct and effective way to stimulate economic growth. The problem is that there is a critical prerequisite, that is the Bank itself must have a very strong risk management and entrenched market oriented. Today, our banks are not mature enough, our country very often there are issues of political, economic behavior of administrative, intended well above market distortions in the implementation of policies in specific, enlargement and the extreme tendencies. This time, if not corrected in time, I am afraid that the same scenario occurs.
China has listed three of the four State-owned commercial banks (Bank of China, China Construction Bank and ICBC) over the past ten years, sold by packaging and policy acquisition has disposed of more than 1.5 trillion yuan of bad assets. According to industry estimates, as of 2007, China's commercial banks are still nearly 1 trillion dollars in handling bad assets have not been effective. Although in the past few years, China's State-owned commercial banks and internal risk prevention strengthened capacity to market through reform, but their overall risk management system is still fragile.
So, we can imagine out such of a closed cycle: State-owned bank significantly improve lending scale-enterprise get funds for investment or expanded production-part funds by enterprise operations transformation into tax-but meanwhile Bank bad assets proportion rose-Government using financial to for State-owned bank pay-this pen money originally can with in taxpayers other welfare Shang, therefore in fact also is taxpayers eventually bear has bad assets caused of economic loss.
In such a cycle exists in three main questions:
First of all, to stimulate the economy less efficient. This is because the Chinese enterprise as a whole, essential in the global economy still in low added value of production manufacturing, so ability to turn money into commercial value as a whole is still relatively weak. You can imagine, in executive order delegation of loan which is likely to be a significant part of the loan does not translate into the Enterprise revenues and profits, were converted half of abandoned buildings and dug pits. (Although, strictly speaking, used to cover plant and funding are also part of the Tai Hang, digging into a number of additional revenue to the economy of the enterprise also has an elevating effect, but after all the economy as a whole, this process also produced unnecessary transaction costs and loss of resources. ��
Second, easily lead to corruption. On the other is Bank lending policies under pressure in a hurry to and accountability for bad debts had relaxed, one side is a lot of difficulties and even arenas are eager to while waiting for the Bank in snowy weather, Bank staff do not appear on such a hotbed of corruption and dereliction of duty is not normal.
Third, for the future performance of Chinese commercial banks to stay hidden. Due to a past of rapid economic growth in China and the Government dominated by bad split, China's State-owned commercial banks in the past few years to maintain the profitability of admire with surprise. However the turn, under the present economic environment by administrative means to encourage Bank lending to enlarge not only depart from the principle of market operation of commercial banks, can easily result in future due to the emergence of large-scale bad assets of banks and a significant reduction in profitability, there is even a huge losses.
In a sense, a global economic recession is the source of the subprime crisis of lending institutions after the irrational and self-discipline of self-exile. As we can't try to rely on the culprit of the crime together to help solve this case, we cannot expect the same of the initiator of the global economic recession helped us out of this disaster. We all know, short for enterprise credit is very dangerous for long now faces profound problems in the global economy, trying to fast track approach to address long-term structural problems, restore the confidence of the market will also be very dangerous.
Of course, in the face of this grim challenges completely let go of the neo-liberal economic policy also does not work. Some scholars found by regression analysis, a national slowdown in GDP growth rates will directly lead to increase in the Bank's bad assets. However, there are other ways to stimulate economic growth considerations.
Such as tax cuts.
In fact, a more optimization of cycle is: national cut enterprise and personal of rate, revenue temporarily reduced-enterprise and personal has more of income can free dominated-Bank by reduce deposits interest induced enterprise and personal to more out of cash for investment and consumption, while also get more of profit space-market of investment and consumption will directly pull domestic demand, and led economic growth-growth total of growth offset has rate cut on national financial of effect, even may brings tax of increased.
Maximum benefit with this respite is capital the authority to control its consumers and markets. Consumers know their needs, they used their own demand to spur economic growth. This demand led economic minimizes human errors and the possibility of human nature into a wrong road, lower the cost of intermediaries, avoiding waste of money and resources.
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