We have become accustomed to the growing trend
in companies to camouflage poor performance with deliberate misreporting and
suspect off-balance sheet shenanigans.
The Chinese authorities have taken cognisance
of this and China's major banks have been asked to publish data on 12
key indicators, including off balance sheet assets.
Chinese banks - especially the big four state-owned lenders - played a
key role in keeping the country's growth momentum going in the years following
the global financial crisis.
They lent record sums of money in an attempt to sustain China's high
growth rate.
There are now fears that some investments have turned out badly and that
banks may not be able to recover those loans.
The concern among many is that a rise in loan defaults would not only
hurt the country's banking sector, but also have a big impact on its overall
growth.
While the reports of bad loans at China's banks account for less 1% of
total lending, some analysts are sceptical and feel that banks were either
rolling over such loans or even restructuring them to try and keep the reported
figure low. A not unfamiliar banking practice.
As evidenced previously some of the most spectacular financial flame outs
have followed a period of ostensibly highly successful trading. In the desire
to recognise these “profits” no thought were given as to how they were being
made.
The Chinese authorities have now decided that it is a worthwhile
exercise to look under a few stones – just in case.
No comments:
Post a Comment