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Home > News and Opinion > Positive Outlook Regarding China’s Financial Market Despite Negativity

Positive Outlook Regarding China’s Financial Market Despite Negativity

George Sterling | Friday, December 28th, 2012

Deciphering the financial market of the 2nd largest economy in the world may allow many individuals to make money. According to experts’ opinion, the concerns pertaining to China’s economy during recent times are due to structural policy changes and are not due to cyclical changes. This explains why Chinese Financial Market has corresponded to the slow global environment and lagging global financial industry.

China’s infrastructure has been riding high since a long time and is at its peak now. Majority of the big banks in the country are increasing their lending activities. The problem isn’t the banks but the Local Government Financial Vehicles in China as they have sprouted resulting in one of the biggest banks of the country to go under massive debt. The China Development Bank was under $80 million LGFV bad debt in its 1st year of operation. However, amidst all the other problems, the problems in China have rather been overlooked.

 

Many investors tend to timely short Chinese ETFs such as the CHIX ETF as the banking sector of the economy isn’t performing well. It is also not a hidden fact that major banks in the U.S such as Goldman Sachs, Citibank, Royal Bank of Scotland and Bank of America have cut their lending to Chinese banks and are rather providing the finances to Temasek Holdings of Singapore. However, what investors don’t know is that President of Temasek Holdings almost became the President of Bank of America as he was the bank’s architect for strategizing the deal of China Construction Bank. Moreover, the Industrial and Commercial Bank of China is still the most profitable bank in the world in terms of market value.

Moreover, in the interim period of 2008 to 2012, a recently released RNCOS report revealed that Personal Insurance Premium Income as well as Life Insurance Premium Income grew by a steady 25 percent in China.

On the other hand, the 4th largest lender in China, Bank of China declared good earnings growth as well as forecast in loaning activities. The insurance sector of the country has also done well during tumultuous times. Chinese banks have also introduced investment linked insurance by products that have only been floated to attract investors. Despite recent news regarding a cut back of expenditure to Chinese banks from other major world players in the global economy, the country’s financial institution is doing very well. Chinese exchange traded funds are still a top choice amid investors as their outlook regarding the economy is positive and therefore consider them as a viable investment choice.

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