Forbes on Chinese Banks

In an article appropriately titled Broken China, guest writer James Grant paints one of the funniest and saddest portraits of China’s banking industry you’re ever likely to read. Here’s how it starts.

Out of a population of 1.3 billion, there must be one honest Chinese citizen. It defies belief that there wouldn’t be. Yet this singular uncorrupted individual is making himself scarce. Scandal chases scandal in the People’s Republic. Misdeeds seem especially prevalent in the bustling city of Shanghai, where a dustup surrounding the alleged misappropriation of assets from the $1 billion city pension fund has led to the forced resignation of three senior executives at the Shanghai Electric Group. And the Shanghai branch of Huaxia Bank has been exposed by a government audit in a scheme to underreport its nonperforming loans, according to Chinese news reports.

But the Chinese press, though sometimes damning, is sweetness and light compared with Chinese prospectuses. Tales of bribery and embezzlement fill the “risk factors” section of the offering documents of the big Chinese banks. You’d swear you were reading the Shanghai police blotter. Insofar as the world depends on China’s growth, the state of the Chinese banking system is the world’s problem.

There is a lot to laugh about in this story, especially Gran’t quotations from some of the big banks’ prospectuses, which blandly note the crimes for which their former executives were fired and/or arrested (“Mr. Wang Xuebing, our former chairman and president and the former general manager of our New York branch, was convicted of accepting over 1 million renminbi…”). Only in China. The Wild, Wild East indeed. This is great reading, but it’s another of those stories where you keep having to wonder whether or not it’s satire.

Via this blog, via this site.

The Discussion: 2 Comments

My fellow ducks, could you guys give me some ideas of a safe place to do my banking? I thought about going with citibank, but they charge $25 a month for accounts with less than 25k. Where do you guys do your banking? I don’t dare put my stuff in a chinese bank, but can’t keep it in Wells Fargo for too long (WF doesn’t have any branches in China). Any ideas?

September 20, 2006 @ 10:10 am | Comment

You might consider HSBC. I used Bank of China when I lived there, and have all kinds of horror stories.

September 20, 2006 @ 10:18 am | Comment

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