Translated material
Keep your distance
US President Barack Obama said followingtalks with Chinese President Hu Jintao in Beijing that China had helped overcome the worst economic crisis in post-war history: “Partnership with China has been a key factor in getting us out of the recession.” These words are not just diplomatic politeness. The PRC is the largest creditor of the United States; more than $1 trillion of Chinese gold and foreign exchange reserves are placed in dollar assets, in particular in US government bonds. China is gradually trying to get rid of its dependence on dollars, without abandoning other types of investment in the United States.
According to Reuters, Chinese and American regulators intend to sign a memorandum of understanding that would encourage Chinese financial institutions to buy small and medium-sized banks in the United States. Chinese bankers complain that they are finding it difficult to open branches in the United States or invest in the banking industry of the world's leading economy. The main reason is the strict regulatory rules and strict approval process for financial transactions in the United States. Chinese banks have become serious players on the global stage, looking for new assets. Against the backdrop of the crisis, the Industrial and Commercial Bank of China became the largest bank in the world by market value, leaving the American Citigroup Inc. far behind.
More than 100 US banks were effectively taken over by the government during the financial crisis, and many more could fail if Barack Obama's administration lacks the funds to bail them out. Troubled US banks are interested in investors from the Middle Kingdom. “Now it is necessary to consolidate the change in attitude towards Chinese investments in the US banking system at the agreement level,” the agency source explained. Two Chinese bank executives said U.S. officials, investment bankers and consulting firms have urged them this year to consider investing in U.S. banks, especially those in financial trouble.
In October 2007, the seventh largest Chinese bank, Minsheng Banking Corp, agreed to buy 9.9% of the American bank UCBH Holdings Inc. However, this investment was not very successful: Minsheng suffered serious losses due to the fall in the value of UCBH shares during the credit crisis. The bank specialized in issuing mortgages, which, as you know, collapsed at the very beginning of the crisis.
Other Chinese banks, notably ICBC and Merchants Bank, have been cautious about investing in the United States. “I feel that there is still significant uncertainty in the US financial market, so I want to stay away from toxic assets at the moment,” said Ma Weihua, head of China’s sixth-largest bank, Merchants Bank. “Our attitude towards American financial assets is now very conservative.” About a year ago, Merchants Bank opened its first branch in New York. Now the Chinese intend to hire more employees to expand their business.