A congressional advisory panel examining China's economy cautioned investors on Thursday to be wary of wading into a lucrative, though potentially dangerous, market.
As banks in China prepare for an estimated US$15 billion in listings of initial public offerings, US investors must be aware of the risks of investing, said C. Richard D'Amato, chairman of the US-China Economic and Security Review Commission.
"Questions need to be raised regarding the loan portfolios of these institutions," he said.
China's four large commercial banks, as well as the thousands of city banks and rural credit cooperatives, are working to make themselves more attractive to investors with such tactics as shifting nonperforming loans to asset management companies, said Marshall Meyer, a professor at the University of Pennsylvania's Wharton School.
But as foreign investors are lured into a market with growth potential "unmatched elsewhere in the world" -- 1.3 billion potential customers and up to 10 percent annual growth -- more must be done to reform the banks, Meyer said. Otherwise, he said, "the alternative is nearly unimaginable."
The experts testifying before the panel described a country struggling with persistent bad loans caused by unnecessary government intervention in banking decisions, corruption and bankruptcies of state-owned businesses.
A solution, Meyer said, could come if Chinese banks were reorganized as shareholding companies, recruited independent directors and seasoned managers and encouraged foreign investment.
Roger Robinson Jr., the commission's co-chairman, expressed concern with the "dubious interests" of customers at some Chinese banks, including those "known to be proliferators of weapons of mass destruction."
"I'm not sure the Chinese leadership has sorted this out," Robinson said.
He did not identify any specific customers.
Meyer said that, for the time being, Robinson's concern is simply "one of the aspects of doing business in China; you don't always know who you're doing business with."
Another expert, Pieter Bottelier, marveled at the recent speed of financial change in the communist country, which wasn't taken up in earnest until after the Asian financial crisis in 1997. To join the World Trade Organization (WTO), China has committed to opening up to foreign investment and competition by the end of 2006.
"All banks are rapidly reforming themselves internally," said Bottelier, a professor at the School of Advanced International Studies of Johns Hopkins University. The WTO pressures "are forcefully pushing banking reforms in the right direction," he said.
He cautioned investors that positive changes are hampered by occasional policy contradictions, corruption scandals and "an unprecedented lending binge" that ended last year and could lead to an increased number of nonperforming loans.
"Reform progress is uneven across the spectrum of banks," Bottelier said.
Taiwan’s Lee Chia-hao (李佳豪) on Sunday won a silver medal at the All England Open Badminton Championships in Birmingham, England, a career best. Lee, 25, took silver in the final of the men’s singles against world No. 1 Shi Yuqi (石宇奇) of China, who won 21-17, 21-19 in a tough match that lasted 51 minutes. After the match, the Taiwanese player, who ranks No. 22 in the world, said it felt unreal to be challenging an opponent of Shi’s caliber. “I had to be in peak form, and constantly switch my rhythm and tactics in order to score points effectively,” he said. Lee got
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