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China’s banking problems aren’t the same as Silicon Valley banks: The Economist

The offices of Silicon Valley Bank in Tempe, Arizona on March 14, 2023. – In hindsight, before last week’s epic collapse of Silicon Valley banks, there were warning signs that not only investors but bank regulators missed. Why the oversight failed remains a hot question among banking experts, with some focusing on the weakness of U.S. regulations. AFP via Getty Images)

Rebecca Noble | Afp | Getty Images

Boao, China — China’s smaller banks have problems — but they’re not taking the same risks exposed by the failure of Silicon Valley Bank, said Zhu Min, vice president of the China Center for International Economic Exchanges. said. Backed up think tank.

In recent years, a handful of small banks in China have had problems.

The bankruptcy of Bao Shang Bank and the freezing of accounts by some local banks in Henan have sparked protests from customers worried about their savings.

The problems at these banks reflect local problems, Mr Zhu said on Wednesday. He noted that the structure and operations of these Chinese banks are unclear, but they do not pose a systemic risk to the economy as a whole.

Zhu said the situation has improved after China’s regulatory actions over the past three to four years.

China’s major banks, known as the Big 5, are owned by the central government and are among the largest banks in the world.

On the other hand, the SVB reflects macro risks, said Zhu, noting that mid-sized US lenders had ample capital and liquidity before they failed.

Macro risks pose a far more worrying issue, he explained. Zhu noted that the US banking crisis is associated with a structural risk of depositors taking advantage of rising interest rates to move funds.

The US Federal Reserve (Fed) has aggressively raised interest rates to ease the country’s decades of high inflation.of USD While strengthening against other currencies, government bond yield to its highest level in several years.

He added that the current U.S. banking problems contrast with the 2008 financial crisis, which was sparked by Lehman Brothers’ exposure to mortgage-backed securities.

Zhu, a former deputy managing director of the International Monetary Fund, was speaking to reporters on the sidelines of the Boao Forum for Asia on Wednesday. The annual event hosted by China is sometimes considered the Asian version of Davos.

This year’s forum underscored the need for cooperation amid global uncertainty and underscored China’s relative stability in emerging from the pandemic.

China’s economy will grow by just 3% in 2022, the slowest pace in decades as sluggish real estate and Covid restraint weighed on growth. The country ended its strict zero-coronavirus policy at the end of last year and is trying to attract foreign investment.

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Consumption remains a clear weakness of the Chinese economy, Mr Zhu said. He expects advanced manufacturing and China’s efforts to reduce its carbon footprint to continue to drive growth.

Private non-state enterprises have led China’s so-called green transformation, Mr Zhu said.

Chinese President Xi Jinping and Premier Li Qiang have repeatedly spoken over the past few weeks about helping private companies.

Xi said stronger cohesion under the Communist Party of China is necessary to build the country.

new rule The bill, announced this month, gives the party a more direct role in regulating China’s financial industry.

Zhu said he hoped the overhaul would streamline financial supervision and warned of an adjustment period. But overall, he said, it would make China’s financial regulation more efficient and transparent.

Correction: This article has been updated to accurately reflect that China’s major banks are known as the Big 5.

Summarize this content to 100 words The offices of Silicon Valley Bank in Tempe, Arizona on March 14, 2023. – In hindsight, before last week’s epic collapse of Silicon Valley banks, there were warning signs that not only investors but bank regulators missed. Why the oversight failed remains a hot question among banking experts, with some focusing on the weakness of U.S. regulations. AFP via Getty Images)Rebecca Noble | Afp | Getty ImagesBoao, China — China’s smaller banks have problems — but they’re not taking the same risks exposed by the failure of Silicon Valley Bank, said Zhu Min, vice president of the China Center for International Economic Exchanges. said. Backed up think tank.In recent years, a handful of small banks in China have had problems.The bankruptcy of Bao Shang Bank and the freezing of accounts by some local banks in Henan have sparked protests from customers worried about their savings.The problems at these banks reflect local problems, Mr Zhu said on Wednesday. He noted that the structure and operations of these Chinese banks are unclear, but they do not pose a systemic risk to the economy as a whole.Zhu said the situation has improved after China’s regulatory actions over the past three to four years.China’s major banks, known as the Big 5, are owned by the central government and are among the largest banks in the world.On the other hand, the SVB reflects macro risks, said Zhu, noting that mid-sized US lenders had ample capital and liquidity before they failed.Macro risks pose a far more worrying issue, he explained. Zhu noted that the US banking crisis is associated with a structural risk of depositors taking advantage of rising interest rates to move funds.The US Federal Reserve (Fed) has aggressively raised interest rates to ease the country’s decades of high inflation.of USD While strengthening against other currencies, government bond yield to its highest level in several years.He added that the current U.S. banking problems contrast with the 2008 financial crisis, which was sparked by Lehman Brothers’ exposure to mortgage-backed securities.Zhu, a former deputy managing director of the International Monetary Fund, was speaking to reporters on the sidelines of the Boao Forum for Asia on Wednesday. The annual event hosted by China is sometimes considered the Asian version of Davos.This year’s forum underscored the need for cooperation amid global uncertainty and underscored China’s relative stability in emerging from the pandemic.China’s economy will grow by just 3% in 2022, the slowest pace in decades as sluggish real estate and Covid restraint weighed on growth. The country ended its strict zero-coronavirus policy at the end of last year and is trying to attract foreign investment.Stock picks and investment trends from CNBC Pro:Consumption remains a clear weakness of the Chinese economy, Mr Zhu said. He expects advanced manufacturing and China’s efforts to reduce its carbon footprint to continue to drive growth.Private non-state enterprises have led China’s so-called green transformation, Mr Zhu said.Chinese President Xi Jinping and Premier Li Qiang have repeatedly spoken over the past few weeks about helping private companies.Xi said stronger cohesion under the Communist Party of China is necessary to build the country.new rule The bill, announced this month, gives the party a more direct role in regulating China’s financial industry.Zhu said he hoped the overhaul would streamline financial supervision and warned of an adjustment period. But overall, he said, it would make China’s financial regulation more efficient and transparent.Correction: This article has been updated to accurately reflect that China’s major banks are known as the Big 5.
https://www.cnbc.com/2023/03/31/chinas-banking-troubles-not-the-same-as-silicon-valley-bank-economist.html China’s banking problems aren’t the same as Silicon Valley banks: The Economist

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