The central government is actively going after its major state-owned banks for ‘violations’ in its lending policies, indicating concern about the direction of China’s financial system. China is not yet facing a Lehman moment, tells business analyst Shaun Rein the BBC, but action is needed.
The Xinhua news agency report said that the [National Audit Office] NAO had retrieved 22bn yuan worth of illegal or embezzled loans and authorities had prosecuted 693 people in relation with those loans.
“This is a significant development. It shows that the authorities realise that bad loans is a massive issue and that they need to rein it in,” Shaun Rein of China Market Research Group told the BBC…
Analysts say that bad loans could threaten China’s growth going forward.
“We are not facing a Lehman moment in China tight now,” said Mr Rein, referring to the collapse of Lehman Brothers in the US at the height of the financial crisis in 2008.
“But if they don’t stop the problem, and it is allowed to balloon, we could face a serious crisis.”
However, Mr Rein added that Chinese authorities had indicated in recent days that they were aware of the issue and was determined to tackle it.
This week China’s central bank temporarily turned off the flow of cheap money in an attempt to reduce the reliance of banks on credit.
One of China’s key challenges is the ability to innovate. The China Weekly Hangout discussed that issue in October 2012, with political scientist Greg Anderson and China consultant at-large Janet Carmosky. Moderation by Fons Tuinstra of the China Speakers Bureau.
On July 1 Hong Kong will see the annual march against Beijing rule. The China Weekly Hangout will examine on Thursday July 4 the turnout, and how the relationship between Hong Kong and Beijing has developed, since China took over the former British enclave. You can read our announcement here, or join the debate at our event page here.