China’s banking troubles are not the same as Silicon Valley Bank, economist says
BO'AO, China — China's small banks have problems — but they don't carry the same risks as those exposed by the collapse of Silicon Valley Bank, said Zhu Min, vice president of the China Center for International Economic Exchanges, a state-backed think tank.
Issues at a handful of smaller Chinese banks have emerged in the last few years.
Baoshang Bank went bankrupt, while some rural banks in Henan province froze accounts, prompting protests by customers worried about their savings.
Those banks' problems reflect local issues, Zhu said Wednesday. He pointed out that while those Chinese banks' structure and operations were unclear, they did not pose systemic risks to the broader economy.
After the last three to four years of Chinese regulatory action, the situation has also improved, Zhu said.
China's major banks — known as the big five — are owned by the central government and rank among the largest in the world.
On the other hand, SVB reflects a macro risk, Zhu said, noting the U.S. mid-sized lender had adequate capital and liquidity before it collapsed.
Macro risks present a much more worrisome problem, he explained. The banking crisis in the U.S. involved a structural risk from savers moving funds to take advantage of higher interest rates, Zhu pointed out.
The U.S. Federal Reserve has aggressively hiked interest rates in an attempt to ease decades-high inflation in the country. The U.S. dollar has strengthened against other currencies, while Treasury yields have risen to multi-year highs.
The current U.S. banking problem contrasts with the 2008 financial crisis that stemmed from Lehman Brothers' exposure to mortgage-backed securities, he added.
Zhu, formerly deputy managing director of the International Monetary Fund,
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