July 27 (Reuters) – Not all the loans to local government financing vehicles that Chinese banks have identified as being at risk of default will in fact turn sour, a source at China’s banking regulator said on Tuesday.
The source, who declined to be identified, was responding to media reports that about 23 percent of the 7.66 trillion yuan ($1.13 trillion) that banks had lent to local governments, mainly to finance infrastructure, could become non-performing. [ID:nTOE66P032]
He said banks could mitigate credit risk by, for example, requiring the borrowers to set aside more collateral.
The estimate of the percentage of loans at risk was based on the banks’ own investigations at the behest of the China Banking Regulatory Commission, the source added. (Reporting by Zhou Xin and Simon Rabinovitch; Writing by Alan Wheatley; Editing by Jacqueline Wong)
China gives itself high marks for managing reserves
July 6 (Reuters) – China expressed confidence on Tuesday that it could achieve stable, long-term returns on its $2.45 trillion stockpile of official currency reserves.
The State Administration of Foreign Exchange said it was confident in Europe’s ability to overcome its current financial difficulties but added that it was keeping a close eye on its investments in the Fannie Mae and Freddie Mac, the two U.S. government-sponsored housing finance agencies.
SAFE said it had not invested in the shares of Fannie and Freddie — a source of concern for Chinese Internet commentators.
SAFE said China had not taken big losses on its portfolio during the global financial crisis. Book gains from rising asset prices outweighed valuation losses caused by the appreciating yuan, the agency said on its website, www. safe.gov.cn. (Reporting by Zhou Xin and Simon Rabinovitch; Writing by Alan Wheatley; Editing by Jonathan Hopfner)