China's Banking Sector Strength Is Overstated

Alicia Damley submits:

The growth potential for Chinas financial sector is undisputed, driven by strong growth and an under-penetrated, large population rapidly accumulating wealth (see here). In anticipation of this, investor valuation of Chinese banks put them into the top group of global banks by market capitalization. Critical to the development of its economy, Chinas domestic financial sector has been nurtured cautiously, shielded from foreign competition and remains under significant regulatory oversight. For example, in banking, lending growth is targeted, lending rates must exceed a floor, deposit rates cannot exceed a ceiling, and all deposits and foreign currency must be transmitted via the banking system. However, this has not prevented a circumvention of letter and spirit of the rules.

A recent example of this


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