China: No more bank bailouts

Caroline Merrell reports in today's Times that Chinese banks are told to expect no more state bailouts:

China’s banking regulator said yesterday that his Government was not prepared to provide any more cash to bail out the country’s debt-laden banks. Liu Mingkang, director of the China Banking Regulatory Commission, said that China’s large commercial banks can expect no more state rescue payouts as they recruit outside strategic investors and issue shares for the first time.

He said that after the banks had taken on outside investors it would be “impossible for state finances again to bury debts from commercial banks’ business losses; otherwise, that would fly in the face of principles of fair market competition”.

A Reuters story adds an official warning of excessive borrowing:

Liu's comments come as another leading economic official warned on Sunday of excessive borrowing by some of China's biggest state-owned companies, who are still Chinese banks' dominant customers.

Li Rongrong, the chairman of the State-owned Assets Supervision and Administration Commission, said many of China's 169 centrally-controlled state enterprises recorded brisk sales growth in 2005.

These state-owned conglomerates include business flagships such as the Baogang Steel Group and the China Petrochemical Corporation. But Li said too many state-owned conglomerates are doing poorly even as China booms, according to the official Xinhua News Agency.

Forty-five of the companies recorded falling profits in the second half of the year, and 80 recorded costs rising faster than sales income, Li said. And many of these companies are turning to loans from state banks, he added.

"Some enterprises are relying on using new loans to pay off old ones in order to maintain daily operations, and a few are facing crisis," Li said. He called for faster internal reform of these companies.

Comments

[debt rescue]

The condition in the market don't show a positive sign as most enterprises are relying on using new loans to pay off old ones in order to maintain daily operations, and a few are facing crisis .