Chinese financial companies are buying into the American banking scene where prices are at a low ebb partially because of the sub-prime problem. Which puts US regulators somewhere between a rock and a hard place. The Fed must sign off on any transaction in which a foreign investor takes more than a 5% stake in a U.S. bank. And it must approve any applications to open branches in the US.

On the one hand, the government is supposed to be committed to unfettered cross-border deals as when American companies try to buy stakes in China.
On the other hand, Chinese banks operate in a very different regulatory environment.

It has been suggested this is why the U.S. has dragged its feet on letting Chinese banks set up U.S. branches.

Minsheng Bank has agreed to buy a 9.9% stake in San Francisco’s UCBH—marking the first such move by a Chinese bank on U.S. soil.
Industrial & Commercial Bank of China (ICBC) and China Merchants Bank have applied to the Federal Reserve to open stateside branches.
Citic Securities has taken about 6% of Bear Stearns for $1 billion.
CCB, China’s third-largest bank, bought Bank of America’s operations in Hong Kong and Macao last year.

China’s three biggest banks rank among the top 20 in the world by market value, with ICBC overtaking Citigroup and Bank of America as the largest in July.

This is not to say that buying into American banks is that great an idea. Pete Hahn, a fellow at City University’s Cass Business School in London said, ‘In the current environment, you would have to be extremely brave or extremely stupid to buy a U.S. bank.’
Source: BusinessWeek

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.

China Minsheng Banking, one of China’s 10 listed commercial banks, has reported net profits up 47% year-on-year to RMB1.11 billion ($144.2 million) in the first quarter of the year.

From January to March, the Shanghai-listed bank earned RMB4.55 billion ($591 million) in interest, up 39% on the same period of last year. The growth rate was much higher than the year-earlier level of 12%.

The great worry with all banks is non-performing loans where the money has gone out and there is not much chance it is coming back in again.

At the end of March, China Minsheng had RMB5.74 billion ($746 million) of non-performing loans on its books, up RMB237 million ($31 million dollars) from the level at the beginning of this year. That is not as bad as it seems. Put it against turnover and the NPL ratio stood at 1.21%, down 0.02% which is very much the right way to be traveling..
Source: China View