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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Thursday, March 30, 2006

Foreign Banks In China Taking a Big Risk....

I wrote on this topic a while back and I feel that foreign banks are taking a huge risk buying stake of poorly run and corrupt institutions in China. And there are some that feel similar to me. I just think that it maybe a better strategy to build you own institution from the ground up rather than try to turn around one of the lumbering giants....mainly because they may not actually want to be turned around.
But some critics fear that global banks may be in for a rough road ahead.

William Gamble, principle at consulting firm Emerging Markets Strategy, said the Chinese banking market is rife with corruption and side dealings, as banks -- which are owned by the government -- lend money based on political connections and influence rather than sound economic practice.

In addition, there is no official credit bureau to highlight high-risk loan applicants and no solid regulatory oversight to insure that loans are paid back to banks.

"The problem with investing in emerging markets is that although the growth rates are often much higher than for companies in developed countries, the economically inefficient or nonexistent legal systems also increase the risk," he said. "If the profit potential is not commensurate with the risk, it might be a better idea to stay home."
All I have to say to these guys is good luck.

1 Comments:

At 1:16 AM, Anonymous Anonymous said...

I don't share your opinion too much. Although most banks are owned by government now, it is sure that government has tried to diversify the ownership structures. This is good that they want to have more eyes on their interests, instead of just keeping the dirty in secrets.

 

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