CHINA BANKING AND FINANCE NEWSLETTER
Vol. 4, No. 5 - April 18, 2003
TOPICS THIS ISSUE:
- State-owned Bank Lifts Loan Restrictions On Private Sector
- Airport Listing Launched
- China's Financial Market Needs Personal Investment
- Liberty Mutual Busy Opening Branches In China
- China's First-quarter GDP Growth Comes In At 9.9 Percent
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State-owned Bank Lifts Loan Restrictions On Private Sector
The Bank of Communications, one of the four biggest state-owned commercial banks in China, has eased restrictions on loans granted to private enterprises as floating capital in Shanghai.
A spokesperson for the bank said self-employed business people or the owners of private companies, for the first time during the past five decades in Shanghai, were eligible for loans of up to five million Yuan (US$ 600,000) as floating capital.
The maximum term of such loans will be one year and the sum of the loan cannot exceed 70 percent of the funds the borrower requires for its project.
Under the regulations issued by the bank, eligible borrowers must have a business license issued by the local government.
The loan would have an interest rate set for small and medium-sized firms with a maximum fluctuation of 30 percent.
State-owned banks, which dominate the financial market in China, used to shun private enterprises when granting loans, but things are changing as the political status of the private sector has improved.
Source: Xinhuanet
Airport Listing Launched
Guangzhou Baiyun International Airport Co., Ltd will issue 400 million A shares, raising over 2.38 billion Yuan (US$288 million) for the purpose of future expanding the new Guangzhou international airport.
The new airport, which will be completed and operational by January 2004, is expected to become a new international aviation hub in the southern part of China. It is also one of the three busiest airports in Mainland China.
Guangzhou Baiyun International Airport Co Ltd holds 51 per cent of shares in the new airport.
Cui Jianguo, general manager of Guangzhou Baiyun International Airport Co Ltd, said April 10 that the fund raised from the sale of A shares will finance the construction of the new airport terminal.
Meanwhile, Guangzhou Baiyun International Airport Co. Ltd is now negotiating with more overseas airlines to run more direct international flights when the new Guangzhou international airport is completed.
In previous years, Xiamen International Gaoji Airport, Shanghai Hongqiao Airport, Shenzhen Bao'an International Airport, Beijing Capital International Airport and Haikou Meilan International Airport have gone public in Shanghai, Shenzhen and Hong Kong respectively.
Source: China Daily
China's Financial Market Needs Personal Investment
A new breakthrough is needed in China's financial industry to encourage individuals to invest in corporate development, experts said at a forum on financial markets held in north China's Tianjin Municipality.
Dai Xianglong, mayor of Tianjin and former governor of the People's Bank of China ("PBOC"), said endeavors should be made to expand the financial market and rationalize the distribution of social resources.
Experts at the forum blamed the irrational financial structure, which is illustrated by disproportionately high indirect financing and an unduly low ratio of direct financing, for the failure for the business community to use the social resources.
Dai Xianglong also state that the irrational structure has deprived individuals of the opportunity to invest huge amounts of personal funds into corporations and has subsequently weakened enterprises' ability to borrow more from banks and increased the risks of commercial banks in credit extensions.
Statistics show that in 2001, state-owned enterprises and non-state businesses had an average liabilities-to-assets ratio of 58.3 percent, down 5.6 percentage points from the 1996 level. However, the debt ratio was still high allowing for real assets losses for the enterprises, implying a slow transfer of cash from individuals to corporate accounts.
By the end of 2002, China had raised US$680 billion in foreign capital through foreign direct investment, offshore listings and overseas borrowing, compared to more than 400 billion US dollars of foreign exchange reserves, offshore corporate and banking assets, according to statistics provided by the forum.
China's gross domestic product grew at an average rate of 7.7 percent in each of the past five years, due in part to a sustained moderate monetary policy, reforms of state-owned commercial banks and policy-oriented banks and intensified control of the domestic financial market.
Source: Xinhua News Agency
Liberty Mutual Busy Opening Branches In China
Liberty Mutual Group, a Boston-based insurance giant, is accelerating the preparations for the opening of a wholly owned branch in China.
The new branch, expected to open within months, will introduce its non-life products and services to one Chinese city but which city it will be located in has not yet been determined.
Currently, the group offers a wide range of products in the global market - including commercial insurance and services, group products, personal insurance and individual life products.
Liberty Mutual's property and casualty products include automobile, property, general liability, fidelity, surety and crime, financial products and other property programs. It is speculated that Liberty Mutual will first introduce its occupational-safety-related property products to China.
The company received consent from CIRC last year to begin preparing for the branch's opening. That approval came nearly two years after Liberty Mutual filed its initial application.
China has promised to allow foreign non-life insurers to open wholly owned operations in five cities - Shanghai, Guangzhou, Dalian, Shenzhen and Foshan - as part of its commitment to the World Trade Organization (WTO).
Liberty Mutual has said it is interested in opening its branch in Chongqing, a business hub in West China.
Source: Business Weekly
China's First-quarter GDP Growth Comes In At 9.9 Percent
China's economy grew by 9.9 per (year on year) during the first quarter, the fastest quarterly growth in six years, China officials announced April 14, 2003.
Accompanying such announcement were other positive economic indicators, including a rise of 17.2 per cent in industrial output, a 27 per cent surge in fixed-asset investment and a 40 per cent leap in foreign trade volumes. Foreign direct investment rose 57 per cent, to US$13.1 billion.
Economists say the figures reflect the burst of activity during the quarter.
"These figures indicate two things," said Huang Yiping, the China economist at US brokerage house Salomon Smith Barney in Hong Kong. "The economy certainly has been growing dramatically. But it is a result of rising oil imports in face of the US-Iraq war. Also, many manufacturers worked hard to deliver on orders before the war began."
The news from the second quarter may not be so positive, with the war and the Sars outbreak taking their toll, said Mr. Huang.
Source: South China Morning Post
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