Thursday, December 18, 2008

Not to steal my own thunder or anything, but I just saw this very interesting article on former head of NBS Qiu Xiaohua. He is out of jail and working for CNOOC, but apparently while in jail,he wrote a book entitled "New Thoughts on the Chinese Economy." And, this article was carried by the People's Daily. Apparently, Qiu still has friends in high places. I think Qiu's "after life" shows that he was a victim of political struggle, and Wen had to give him up so that Hu could get to Chen Liangyu. For Chrissake, he only had one mistress; that is really nothing in contemporary China. Even a township party secretary can swing that, much less a minister. Anyway, 老邱加油!


2008年12月19日04:39 来源:《广州日报》
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  本报讯 (记者陈翔)前国家统计局局长邱晓华新著《中国经济新思考》已出版并在购书网站面市。有网友评价:“以邱经历学识,此书值得一读。”





I really don’t see what Victor Shih is worried about. If the government wants a bank to make a loan and the government is willing to either guarantee the loan or provide the capital for the loan, then there is no issue of risk management for the bank. All the risk managers have to do is to get that sheet of paper saying “The Central Government promises to cover the loan if it goes bad” and it’s no longer the bank’s problem.

The other thing about risk management is that you can properly risk manage things not only by decreasing risk but increasing loss reserves. It’s perfectly fine to lend to risky clients if you have the loss reserves to cover defaults.

Also his article makes it seem like the only reason that Chinese banks fixed themselves was Western pressure, and now that pressure is gone, that the government will backslide. In fact, the reason the Chinese government has spent the last ten years fixing the banking system was because they were (and still are) terrified of a banking crisis that would bring down the government.

Recent events haven’t reduced this fear, and pointing out that Chinese banks aren’t collapsing when American banks are, should be enough to keep banks doing good risk management.

If Westerners want Chinese banks to have good risk management, the thing to do is not to lecture and instead say “look you guys are geniuses and we are idiots, study what we did over the last ten years and whatever you do, don’t do the same things, but rather keep doing what you were doing.”
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