The Communist Party took over the country in 1949. After which, the Party made Chinese banks credit agencies for the government and state-owned companies.
Until as recently as the 1990s, branch managers of the banks was appointed by local party committees.
What's more - loans were not expected to be repaid. The government lended to itself...so...
Oversight was lax if there was any at all. Fraud was rampant.
And still.....Investors have poured $37 billion into the Bank of China, China Construction Bank and Industrial & Commercial Bank of China in the past 15 months.
What are these investors thinking?
Perhaps they think if enough money is invested some of it will surely show a return, no? Oh, and investors, to be sure, are NOT investing their own money.
According to the IMF, banks do not do profitability checks or estimate credit risk when lending and favoring state-owned companies.
The result - Chinese banks have a combined $476 billion of non-performing loans or loans that are likely going to turn sour. I wonder if I could have a million of so of that and nobody come after me for it.
China's banks are black holes. But what is more stupid is the people who pour money into those holes.
What do you think?
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