Beijing secures a $ 49 trillion industry: its banking system. And it does so with a reform project dedicated to the five “too big to fail” banks which will come into effect on May 1st. The fear of system failure is strong for a China that promises stability, prudent monetary policy and open markets. In 2020, a report by the State Administration of Foreign Exchange (SAFE) reveals, a river of money poured into China, a destination that attracted $ 520.6 billion in foreign investment, up 81% on 2019.
The anomalies of Chinese banks
Direct investments grew by 14%, and the financial market attracted $ 257.7 billion (+ 73%). Direct flows on Chinese bonds grew by 86% to 190.5 billion, while equities reached $ 64.1 billion (+ 43%).
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But in record China, the banking system is not functioning as it should. The central bank has long ago imposed on the largest – among them Industrial & Commercial Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd – precise conditions precisely because they are “too big to fail” .
The whole system as anticipated by Sole24Ore will be divided into five categories which will have to cover with differentiated quotas between 0.25% and 1.5% of the ratios provided for each.
The central bank, in concert with the China Banking and Insurance Regulatory Commission (CBIRC), has issued a draft of the regulation set to go into effect next month. As always, the goal is to contain systemic risks.