China’s banks need to raise $90 billion in capital through 2011
That’s a bit of a headwind.
This week China’s big state-controlled banks announced plans to raise $11 billion through stock and bond sales to meet new capital requirements set by the country’s bank regulators.
For example, Bank of China (BACHY.PK) has announced plans for a $6 billion convertible bond offering.
Deals like that are just the first installment, however.
China’s big banks have another $22 billion in stock and bond sales in the pipeline. To keep with my previous example, in March Bank of China will ask regulators for permission to raise almost $30 billion
And that’s not the end of it. Chinese banks will have to raise at least $40 billion on the Shanghai stock market and $20 billion on the Hong Kong market by the end of 2011, Guotai Junan Securities estimates, according to the Financial Times.
All the money that China’s big banks need to raise by selling stocks and bonds means that there’s less cash available to fuel appreciation in the rest of China’s market.
IPOs (initial public offerings of stock) will be the sector that feels the competition most directly. It certainly hasn’t helped that recent big Chinese IPOs haven’t lived up to expectations for huge gains on the first day of trading. XD Electric, for example, fell 2% on its first day of trading in Shanghai.
But taking $30 billion out of the pockets of stock and bond buyers isn’t going to help prices of any of Chinese stock traded in Hong Kong or Shanghai. $30 billion (or even the $90 billion projected through 2011) isn’t enough to tank the Chinese stock markets but it is enough to take a little bit of the air out of any bubble.
Which is just what Beijing regulators are hoping to accomplish.
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The Chinese always amaze me with their shrewd economic moves. I don’t suppose we could trade them Bernanke for one of their regulators and a first round draft pick?
Aren’t they communists or socialists? Does this show the free market system doesn’t work the best?
specialcraig,
We don’t have a “pure” free market system. In fact, if you subtract the oppressive government, our economic system isn’t far removed from what China has.
> I don’t suppose we could trade them Bernanke for one of their regulators
They would tar and feather Bernanke and throw him in the Yangtze river.
Bernanke was as wrong as Greenspan…
Jim,
Any thoughts on First Solar’s chairman selling 40% of his shares? FSLR is in free fall at the moment:
http://www.businessweek.com/news/2010-02-25/first-solar-s-ahearn-wal-mart-protege-slashes-stake-update2-.html
Is the solar industry dead?
Ed,
You have to believe that our system is “Free” to have that kind of comparison.
Bernanke: There’s No Housing Bubble to Go Bust
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html
Greenspan Says He Was Wrong On Regulation
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/23/AR2008102300193.html
Opps Sorry Ed I meant that for specialcraig, and of course I was saying the same as Ed.
No problem Christopher.
For what it’s worth only 5% of the Chinese affiliated with the Communist Party. For the most part, I have found them to be non-ideological. Deng Xiaoping said “to be rich is glorious” when China took to a capitalistic-like path (albeit a Chinese version). It’s become a unifying force to replace the vacuum of communist ideology and is underpinned with a dash of pride in country and a strong desire for progress (doesn’t sound like the US senate, does it!).
to EdMcGon: As for your first comment about a regulatory first round draft pick – they have a strong bench and lot’s of very competent players who are highly committed. I’d settle for a 5 or 6th round choice.
tostoryteller,
Actually, I’d settle for Bernanke in exchange for one of their regulator’s first born!
If we wanted to be serious about this why don’t we trade them Bernanke, Bush, Rumsfeld, and Cheney for an all you can eat buffet.
I know a nice little place down by the river in Guangzhou that would be just the ticket . . .
Can we throw in Obama and Geithner too?
As I love Beijing food, I would gladly supply some European leaders.
To be serious about it, we have to take into consideration that China has become the richest country in the world, even if a few hundred millions of them are barely surviving, and that, when they have decided something, they know nothing of filibustering and lobbyists, although, of course, relations are all important, and, from time to time, they shoot someone who has taken improper bribes.
I wish it were just the leaders. It seems the entire system is broken sometimes.
specialcraig:
Chinese leaders and their system are COMMUNIST, but they adopted capitalist economic strategy and techniques. (Chinese people are always very practical.) What they are today is NOT because of communism, but exactly because of CAPITALISM. Prior to now, the Chinese did communist economy for 30 years and it was a miserable failure. Like all other communist countries, they could not even produce enough basic necessity.
The biggest problem with communism is that it takes away individual liberty and freedom which is the key to create the greatest country on earth, US. It disregards the value and dignity of ordinary people while few elites at the top live large on people’s back. This is the case in all communist countries from east Europe to China, N Korea and Cuba.
Statests love communism because it gives THEM (few elites) the control over millions of people’s lives and control means power and money.
For those who fancy about socialism or communism taking care of you, you must understand that first of all you loose the control of your life the moment you hand it over to someone else. Secondly, governments around the world had never been able to prove that they can produce enough to satisfy everyone from basic necessity to health care, etc. and it’s particularly true in communist and socialist countries. You’ll end up with even LESS than you would have in a capitalist society. You’ll find yourself at the mercy of few elite.
YX:
Do you thinnk the Chinese have individual freedom and liberty now? They may have more than they had 40 years ago, but the only freedome they have is what the central government allows. They control media, internet sites, etc. Eventually they will need to either give the people real freedom or they will institute another crackdown and have the “Great Leap Forward (really backward)” Part 2.
YX:
It seems to me a few elite dominate policy for the benifit for the elite here in the US. Its money that determines policy which is why there are so many lobbyist in washington. If you dont have millions to push your agenda then you are at the mercy of those rich who do.
XY – to follow-up on Chemace – 2% of the US population controls 95% of the wealth — sounds like your description of “communism”. Money talks… “we the people for the corporations…”
Run26.2
Read my posting carefully before commenting. You missed my points.
chemace:
What you described shows the failure of the government. That’s what Jim implied this posting too. In order for capitalism to work well, there must be good rules and rule enforcers. It’s like American football. In order for the game to be viable, there must be rules and referees. Those who violated the rule has to be kicked out or punished. That should be the role of government which instead chose to work for whoever pays them and now it even tries to take over the whole thing which has never had a track record of being good at running anything.
rolfer1
The riches also pay overwhelmingly high portion of taxes too. Whatever the riches have in this country are what they EARNED. That’s the beauty about America where the majority wealth are EARNED. Communism just CONFISCATES and then few government elite run it and the mass begging for things.
More, there has never been a country in the world which could gave this many people this much wealth as United States did. All others are either failure or only worked on a very small population with single culture. China is sort of hybrid, but keep in mind that China is doing capitalistic ECONOMY. Large part of the economy is carried out through market economy.
YX… apologies for mis-reading your post.
Run26.2
No needs to apologize.
Thank you YX. I agree.