Chinese state banking – too

Chinese state banking – too much cash !!The Postal Savings Bank was founded in 2007 when the government split off the savings accounts from the country’s 36,000 postal outlets. It is the nation’s fifth-biggest bank by deposits with $724bn.But it has lent out only a fraction of that cash. Its loan-to-deposit ratio stands at less than 20 per cent, compared with a Chinese industry-wide average closer to 70 per cent.Sitting on so much underused cash, some bank managers are alleged to have provided loans at rates well below the prevailing cost of money in the open market in return for kickbacks. Bound by tight restrictions, it was expected that the Postal Savings Bank would have many more deposits than loans on its books for years to come.China Development Bank, a state-owned bank with a mandate to fund infrastructure construction, is the sole provider of acquisition financing to CP Group. CDB does not take deposits and its main source of funding is to sell bonds to other banks. As a government-backed, gold-plated borrower, debt is cheap for CDB and it is sitting on a pile of unused cash.Non-bank sources of credit, including bonds, exceeded bank loans in the second half of 2012, an important step towards a diversified financial system. But there is a catch. Economists at Citigroup estimate that about 70 per cent of all non-bank financing in China is in fact only the off-balance-sheet activities of traditional banks.http://www.ft.com/intl/cms/s/0/c4466c7a-5f02-11e2-8250-00144feab49a.html#axzz2I87H7c6G