Chinese banks increase overseas loan activity

Discussion in 'Wall St. News' started by ASusilovic, Nov 29, 2009.

  1. Foster's Group Ltd, Australia's biggest brewer, never borrowed from China until this year, when Bank of China helped arrange $500 million in loans to refinance debt.

    Chinese lenders are "injecting large amounts of liquidity", said Peter Kopanidis, group treasurer at Melbourne-based Foster's.

    The combination of the world's fastest-growing economy and "a very different deposit base" is helping Bank of China "contribute more at a time when some banks may be capital-constrained", he said.

    Industrial & Commercial Bank of China (ICBC) and Bank of China underwrote $25.6 billion of syndicated loans in the Asia-Pacific region outside Japan this year, or 14.5 percent of the total, up from 4.9 percent a year earlier, data compiled by Bloomberg show.

    They're providing capital as Western banks from New York-based Citigroup Inc to Royal Bank of Scotland Group Plc in Edinburgh retrench after global financial institutions took $1.7 trillion of write-downs and losses since the start of 2007.

    China's banks boosted overseas syndicated loans to $4.9 billion in the first 10 months of this year, up from $3 billion in the same period of 2008. In fact, their growth in the market is the biggest of any nation, Bloomberg data showed. Meanwhile, the US and European banks' Asia-Pacific share slumped to 14.3 percent, down from 30 percent in 2008.

    Lending encouraged

    In the United States, about $111 billion of leveraged loans, or those made to speculative grade borrowers, have been made in 2009, down from $804.9 billion in the comparable period of 2007.

    The State Administration of Foreign Exchange in Beijing is encouraging lenders to make yuan-denominated loans overseas to reduce exposure to consumers amid concerns that too much cash may cause the nation's stock and real estate markets to overheat.

    The Shanghai Composite Index of stocks has climbed about 82 percent this year, compared with 21 percent for the Standard & Poor's 500 Index.

    The Banking Regulatory Commission told city banks last month to avoid the "blind" pursuit of size after domestic lending surged to a record 8.9 trillion yuan in the first 10 months of 2009, up from 3.7 trillion in the same period a year earlier.

    China may need to rein in credit growth to stem inflationary pressures and reduce banks' risks of future bad loans, the Paris-based Organization for Economic Cooperation and Development stated in a recent report.

    "We are seeing signs of potential asset bubbles" in Asia, said Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd.


    Offering credit to companies outside China is also a way for the nation to invest its $2.27 trillion of reserves without buying treasuries.

    China's holdings of US government debt swelled to $798.9 billion in September, up from less than $100 billion in 2002, according to the US Treasury Department.

    China, the biggest lender to the United States, is "shouldering its responsibilities" to restore stable global growth, Premier Wen Jiabao said on Nov 12.

    "Chinese banks have an incentive to lend offshore," said Viktor Hjort, a Hong Kong-based credit strategist for Morgan Stanley, an adviser on global takeovers. "China is sitting on large dollar reserves over-allocated to US Treasuries that it wants to reduce."

    Seven Chinese banks made syndicated loans abroad in the first 10 months of this year, compared with three in the same period of 2008, Bloomberg data showed.

    A syndicated loan is when a group of lenders or financial institutions provide a credit facility to a borrower.

    Global integration

    Beijing-based ICBC, the world's most profitable bank, loaned $790 million to borrowers ranging from Australian supermarket chain Woolworths Ltd to Dutch commodities trader Trafigura Beheer BV and the Dubai Civil Aviation Authority, the data showed.

    "China's economy is more and more integrated into the global economy, and through this crisis we saw demand from Europe and the US decline but demand from the emerging markets, particularly Asia and Africa, rise," ICBC Chairman Jiang Jianqing said.

    Royal Bank of Scotland, which is selling or shutting businesses in two-thirds of the 54 countries in which it operates after posting the biggest loss in British corporate history last year, has made $2.1 billion syndicated loans in Asia-Pacific excluding Japan this year, down from $7.8 billion in the same period of 2008, Bloomberg data show.

    Citigroup has made $11.6 billion US leveraged loans this year, down from about $25 billion in 2008 and $103 billion in 2007, Bloomberg data show.

    'Long haul'

    Australia's APA Group, whose roots stretch back to 1841 when gas lamps first lit the streets of Sydney and which now transports more than half of Australia's natural gas, never borrowed from a lender in Asia until Bank of China offered cash, according to Chief Financial Officer Peter Fredricson.


    Chinese households' savings as a percentage of income rose to 37.5 percent last year, up from 27.5 percent in 2000, according to Stephen Roach, chairman of Morgan Stanley Asia Ltd in Hong Kong. The rate of US household savings was 3.3 percent in September, the US Commerce Department reported.
  2. 1) Part of the loans will be paid back in beer.
    2) If China becomes a consumer-driven society and adjusts its birthing laws, the world could be "saved". :cool: