Bond Issue - Big four banks plan to issue up to $48 billion bond sale to retail investors to boost the banks’ capital adequacy requirement of 8% by the end of 2002.
- Current corporate bond market is about rmb 12 billion.
- In 1998, ministry o finance issued Rmb 270 billion to re-capitalize the banks.
Other Financial Institutions (non-bank financial institutions) Financial institutions (continued) - Financial institutions (continued)
- All these financial institutions under the oversight of the People’s Bank of China
- comprise 10% of the financial intermediation
- finance the non-state sector
- Centrally controlled credit plan does not extend to these institutions, thus moral hazard problem exists because controlling organizations use them to evade regulation and supervision
(International) Trust and Investment Corporations (ITICS) - More than 200
- Designed to promote investment in and from China
- Power broader than banks
- Make foreign exchange guarantees
- raising funds via
- deposits (maturity > 1 year)
- issue bonds
- and overdrafts
- make S/T and L/T loans (infrastructure projects)
ITICS (continued) - ITICS (continued)
- borrow from foreign banks
- China International Trust and Investment Corporation (CITIC) -- oldest
- Guangdong ITTIC (GITIC) failed in 1998
- second largest trust corporation
- more than $4.7 billion debts, a large portion held by overseas creditors
- June 1998, closure of Venturetech Investment Corporation
An Example-CITIC - Leading state-owned conglomerate
- plans to group its expanding financial services under one holding company, creating a financial services “supermarket”, which may be listed in Hong Kong
- New structure (similar to U.S. Citigroup)
- Subsidiaries:
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