It is easier to make money than sense out of China’s banks. These big four state-owned commercial banks are huge profit centres, but many who see vulnerabilities in China’s economy think that these banks are the problem when they actually reflect symptoms of distortions elsewhere. China’s banks are in fact too secure – and their performance could be improved by strengthening competition and breaking up the “too big to manage” entities.
Many critics cite inflexible interest rates which are deemed too low relative to inflation as the issue. Others point to excessive government interventions fomenting risks such as a property bubble. Still others remind us that the state-owned banking behemoths are sitting on a mountain of household deposits which feed into temptations to misuse captive funds given lax governance safeguards. Read more
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