The official Shanghai Securities News reports, citing sources, that the China Development Bank, one of the country’s three policy banks, is planning to invest over RMB7 billion in Shenzhen Financial Leasing, taking a 90% stake in the latter.

The capital injection will make SFL the largest financial leasing firm in China.

Shenzhen Financial Leasing currently has registered capital of RMB716 million, with Hainan Airlines Group the largest current shareholder with a 21.66% stake.

Xi’an Aircraft Industry, the parent of Xi’an Aircraft International, also owns 18.16% of Shenzhen Financial Leasing.

In October 2007, State Grid, one of China’s two state-owned power transmission firms, said it was selling its 3.21%t stake in Shenzhen Financial Leasing for a minimum of RMB16.10 million.

State Grid said in a statement to the Shanghai United Assets and Equity Exchange that Shenzhen Financial Leasing reported a 2006 net profit of RMB11 million, compared with RMB1.26 million a year earlier.

In January 2007, China’s banking regulator issued new rules permitting qualified local and overseas-incorporated commercial banks to apply to set up directly-controlled lease finance companies. Leading domestic lenders including Industrial and Commercial Bank of China , China Construction Bank and Bank of Communications all of which have since established lease financing units.

China Development Bank has reportedly won central government approval to restructure itself into a commercial bank. The bank is expected to bring in strategic investors ahead of going public.
Source: Forbes

A long article in The Times that you should read. Click on Source at the end of the article.

Funds backed by foreign states could have $12,000 billion to invest by 2012. The financial muscle of these vehicles, are now causing alarm in the West. To put a block on it would suggest the West does not have an open economy.

These sovereign funds have been around since 1953. But it is only recently the power of sovereign funds has mushroomed. Now China has been boosted by income from huge trade surpluses.

Stephen Jen, chief currency economist at Morgan Stanley, estimates that even if China tries to rein in its current-account surplus, the country’s sovereign fund could grow by $200 billion a year, becoming the world’s largest within a few years.

Gerard Lyons, chief economist at Standard Chartered, said: ‘There is a serious likelihood of western governments and sovereign wealth funds clashing over what they can buy and where. A protectionist backlash against strategic investments is real and threatens global trade.’

China is putting $1 billion into Bear Stearns. This has made many Americans uneasy.
Industrial and Commercial Bank of China is putting $5.5 billion into Standard Bank, Africa’s biggest lender.
The China Development Bank bought a 3.1% stake in Barclays in July.
China Construction Bank in August agreed to buy Bank of America’s Hong Kong and Macao operations for $1.2 billion.
China is promising up to $8.5 billion of investment in the Democratic Republic of Congo in exchange for a slice of its mineral assets.
Last year, China signed a $1.6 billion deal with Angola to develop an oilfield in the African state. Read the full article. Well worth the time.

Source: Times Online

The Bank of China, one of the country’s biggest lenders, has revealed that it held a $9.6 billion exposure to securities backed by American sub-prime mortgages although all of them are highly rated.

China’s two other large, publicly listed institutions, ICBC and China Construction Bank have each disclosed sub-prime holdings above $1 billion.

In the very unlikely event that the entire investment were to prove worthless the Bank of China would be hit badly: 18% of shareholders’ equity. Not a probable scenario. But neither, according to The Economist, is it likely that the $151m the bank put aside for such a possibility will cover potential losses.

Chinese banks are hugely profitable: among the biggest banks, earnings are growing by more than 40% a year and non-performing loans have shrunk from about a quarter of the total several years ago to less than 4%.

Still it is something of a worry. Bank of China’s investments in iffy American mortgages are almost as much as the amount it raised in a Hong Kong share offering last year.

Moody’s, a ratings agency, reckons that the loan-to-deposit ratio for Chinese banks is a modest 68%. For Bank of China the number is lower still, about 60%.

This poses a huge investment challenge for the banks, because lending should be their most lucrative business. Typically, they earn 7% on a loan, compared with 3% paid to depositors. So the banks went hunting abroad and unfortunately found the American sub-prime mortgage market which is now in a state of confusion and doubt as borrowers default on their mortgages.
Source: The Economist

China Construction Bank Corporation has reported a whopping 47.5% year-on-year increase in its first-half net profit.

For the Jan-June period, the bank’s net profit rose to RMB34.3 billion ($4.5 billion) under international accounting rules, with earnings per share up 50%.

By the end of June, the bank’s total assets had increased 12.28% to RMB6,117.791 billion ($804.97 billion) compared with the end of last year and its non-performing loan ratio decreased 0.34 percentage points to 2.95%.

Which is the sort of report that directors always feel very happy giving to its shareholders.

China Construction Bank Corporation was listed in the Hong Kong stock exchange in October 2005. It issued 26.486 billion shares on Hong Kong stock market and raised $9.2 billion. The bank plans to float no more than nine billion RMB-denominated shares in China this year to supplement its capital.
Source: People’s Daily Online

The People’s Bank of China issued RMB101 billion ($13 billion) worth of central bank notes to a handful of financial institutions in an effort to absorb excess liquidity from commercial banks.

The 3-year notes carry an annual interest rate of 3.69%. The notes were sold to four major State-owned commercial banks, share-holding banks and municipal commercial banks.

China Construction Bank, the Industrial and Commercial Bank of China, Bank of China and the Agricultural Bank of China bought RMB30 billion, RMB27 billion, RMB17 billion and RMB12 billion respectively. Other banks such as China Minsheng Banking and Shanghai Pudong Development Bank also took in substantial amounts.

Analysts said that due to recent poor sales of ordinary notes in open market operations, the central bank had to issue them to particular institutions to absorb excessive liquidity and prevent the economy from overheating.

Meanwhile, in further financial moves, according to the Beijing Times the Ministry of Finance will issue RMB600 billion ($78.9 billion) of special treasury bonds to the Agricultural Bank of China next week, the first batch of a planned RMB1.55 trillion sale.

The Agricultural Bank of China will then act as an intermediary channeling the bonds from the Ministry of Finance to the central bank, which in exchange will release part of its foreign exchange reserves for overseas investment.

The central bank will use them as a financial tool to absorb excessive liquidity in the domestic market.

By the end of June, China had the world’s largest foreign exchange reserves of more than $1.3 trillion. Investing the huge sum into more profitable areas is an important task for financial regulators. Analysts also believe that the issuance of the special bonds suggests a new round of foreign exchange investment is on its way.
Source: China Daily in two separate stories thus China Daily and China Daily.