It might be time for China’s banks to revise their risk management policies. The National Audit Office found improper activities when checking the books of the Industrial & Commercial Bank of China, China Construction Bank, China CITIC Bank, the lenders acknowledged in statements. Banks have also been looking to make money off corporate loans used to finance M&A activity both at home and aboard. They shouldn’t expect to make any profit off these loans, however, as the risks involved will prevent the companies from growing said Cai Esheng, vice-chairman of the China Banking Regulatory Commission. Cai said banks had extended US$1.9 billion in loans to finance domestic mergers this year and US$400 million for cross-border deals as of the end of May. Another US$2.8 billion for domestic mergers and US$440 million for overseas acquisitions are currently in the pipeline. Whether these loans will turn into excess non-performing loans remains to be seen though.
The US and the European Union (EU) also seem to be going out on a limb today. They filed an anti-trade case against Beijing alleging that China’s export duties on some raw materials gives China an unfair trade advantage. But analysts said the US and EU aren’t likely to win the case as the US’ "Buy American" provision under Washington’s own stimulus package means it isn’t exactly operating on a level playing field.