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Chinese banks accused of massaging loan losses

December 18th, 2009

Industrial and Commercial Bank of China, branch, image courtesy of Businessweek

According to a recent research note from the ratings agency Fitch, Chinese banks have been massaging their liabiliies and probably also their losses. They are apparently doing this by shifting corporate loans into off-balance-sheet vehicles in a bid to deceive regulators, so they can keep the credit taps on and continue to prop up the Chinese economic bubble.

FT Alphaville’s Tracy Alloway has written an excellent analysis piece on the topic. When I read this, I couldn’t help thinking of the unseemly way in which UK bank HBOS massaged its own corporate loan losses in an apparent bid to deceive regulators and investors in the period 2003-08. And we all know what happened to HBOS and by extension the UK economy.

  • See my earlier post on Jim Chanos‘s negative take on China

Short URL: https://www.ianfraser.org/?p=997

Posted by on Dec 18 2009. Filed under Blog. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

1 Comment for “Chinese banks accused of massaging loan losses”

  1. All indications point to accelerated levels of lending early next year. Many banks are still sitting on unused 2009 funding and will be keen to get it off their books early in the year. So many of China’s and the worlds problems would be alleviated if they would direct investment into domestic demand and building decent social safety nets for their people. However, they are still going down the route of blowing a monumental asset bubble and directing investment to building even more export capacity. Professor Michael Pettis at Peking University is a good source of what is going on in China.

    http://mpettis.com/2009/12/

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