China Banks Suffering From Slower Economic Growth and Credit Squeeze

Sticky tape and chewing gum may be what’s needed to hold Chinese banks together as they learn to operate in an environment of slower economic growth and generally tighter liquidity conditions, says one banking analyst.

Although inter-bank funding costs for China’s lenders have fallen back this week after last month’s unprecedented credit squeeze, concerns about future money supply continue to pressure banking stocks in Shanghai and Hong Kong.

“I just hope there’s enough chewing gum and sticky tape to hold things together in the Chinese banking sector in the next couple of years,” Mizuho Securities Asia’s Banks Analyst Jim Antos told CNBC.

“The liquidity crisis that we’ve just had shows how difficult it is for the regulator in China to be managing for a lower growth scenario. They don’t have experience for this and it was a blunder to have repo rates go up to 20 percent,” he said.

CNBC

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