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BEIJING (MNI) - The following are highlights from the China press for
Monday, January 22:
The Chengdu Branch of Shanghai Pudong Development Bank was fined CNY462
last week by China's banking regulator for illegally loaning as much as CNY77.5
billion to shell companies as cover-ups for its non-performing loans, Shanghai
Securities News reported over the weekend. Top management associated with the
scandal were fined and charged, as well as barred for life from working in
banking, while 195 lower-level executives were disciplined, it said. Pudong Bank
said in an exchange filing that the fine's impact is immaterial to the bank's
***Comment: Chinese commercial banks, under regulatory pressure to reduce high
NPL ratios, lent recklessly to SOEs. These loans increased the risk of defaults
and made it harder for private companies to obtain capital.
China is clamping down on the use of local government funding vehicles
(LGFVs), the 21st Century Business Herald reported Monday. The central
government is enforcing debt swaps or separating LGFVs to independent companies
to reveal invisible debt held by local authorities. The process of regulating
LGFVs is slow and difficult given that it ties to the local economies and that
it gets implicit guarantee from local governments, it said.
***COMMENT: LGFVS were was created to help local governments meet targets. Local
officials are pressured by evaluations from central government. Irregularities
presented by LGFVs therefore cannot be eliminated without overhauling the fiscal
structure. These on-again and off-again approaches will not resolve the issue.
The debt ratios of SOEs and local governments need to be closely watched,
Li Yang, a researcher with the Chinese Academy of Social Science and advisor to
China's leadership, said in a forum at the Renmin University on Sunday. With
China experiencing slower growth, excess production capacity and a difficult
investment environment, rising leverage ratios, debt and non-performing loans
are posing more risks, Li said. China's financial system is marked by that
borrowers need to continue refinancing loans - due to the lack of long-term
financing options - and not by capital shortage, Li said. China should boost the
use of equity in its capital market and establish long-term credit institutions,
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