Foreigners predicting doom for China’s banks have got it all wrong, according to James Stent, who spent more than a decade serving on the boards of two Chinese lenders.
Instead of falling into a debt-fueled crisis, China’s banks are able to stave off trouble because of the willingness of the government to throw money at problems in order to ensure financial stability, Stent argues.
“As one Chinese banker who works for an American bank said to me: ‘In the West, money flees problems; in China, money flows to problems to solve them,’” said Stent, who wrote “China’s Banking Transformation: The Untold Story,” a book of lessons gleaned from inside the nation’s banking system. His book is published by Oxford University Press.
Fluent in Mandarin, Stent spent more than 40 years working in commercial banking in Asia, including 13 years on the boards of China Minsheng Banking Corp. and China Everbright Bank Co., where he was on the audit committee.
While his view contrasts with those of doomsayers such as analyst Charlene Chu and hedge fund manager Kyle Bass, Stent doesn’t dismiss all the concerns around China’s lenders. He says there are worry spots that could cause disruptions, such as risks around lending to privately owned companies rather than state-owned ones. Yet any bank failures will be dealt with quietly and imperceptibly, such that the outside world won’t even know about them, he says.
S&P Global Ratings cut China’s sovereign credit rating for the first time since 1999, citing the risks from soaring debt. The rating was cut one level to A+ from AA- [see more on page 20]. Bloomberg
No Comments