BEIJING - Three of
China's "Big Four" state-owned commercial banks
shouldered their way into the world's top 10 this
year in terms of total assets, but they now face
exchange losses of billions of yuan as the Chinese
currency continues to rise in value, according to
the Oriental Morning Post.
The "Big Four"
are the Industrial and Commercial Bank of China
(ICBC), the Bank of China (BOC), the China
Construction Bank (CCB) and the Agricultural Bank
of China. The first three are now
listed on the Hong Kong stock
exchange.
CCB listed on the Hong Kong
stock exchange in October 2005 and investors
swooped to buy its shares, paying in foreign
currency. The bank's half-year report says its
exchange losses amounted to 2.4 billion yuan
(US$307 million) in the first half of 2006.
China's soaring foreign exchange reserves
have pushed up the yuan, CCB president Guo Shuqing
was quoted as saying at a finance forum in
Beijing. "With their huge sums of foreign
currency, overseas listed banks have come under
great pressure," he added.
Guo's remarks
were echoed by Jiang Jianqing, president of the
ICBC, which is listed in Hong Kong and Shanghai.
He described the foreign currencies the bank had
raised from overseas listing as a big challenge.
China is reluctant to convert foreign
currency, particularly US dollars, back into the
yuan because that would cause the value of the
yuan to increase - making exports more expensive
and defeating the purpose of having a low-valued,
export-friendly currency.
With 4.6
trillion yuan in total assets and a capitalization
of US$123.7 billion, CCB is now the world's
eighth-largest bank in terms of total assets, said
Zhu Yunlai, president of China International
Capital Corporation Limited (CICC).
The
ICBC raised $21.9 billion in the world's biggest
initial public offering (IPO) in October, far
exceeding the previous record, a $18.4 billion IPO
by Japanese mobile phone company NTT DoCoMo in
1998.
The bank currently ranks fourth in
the world, with 6.5 trillion yuan in total assets
and a capitalization of $172.2 billion. Its share
price has increased by more than 30% since it
launched the IPO on October 27.
Without
putting a figure on the exchange losses, Jiang
said ICBC would seek to avoid losses through
exchange settlements, hedging and foreign direct
investment.
Jiang said that ICBC had
completed its purchase of PT Bank Halim Indonesia
- its first acquisition outside China - and paid
for the whole acquisition cost in US dollars.
The BOC, the country's largest foreign
exchange bank, rose to number six in the world,
with total assets of 4.7 trillion yuan and a
capitalization of $120.8 billion, but suffered
exchange losses of 3.5 billion yuan in the first
half this year.
Goldman Sachs, the world's
leading investment banking firm, has predicted
that BOC's profits and net profits will shrink
3.3% and 0.6% respectively for every 1% increase
in the yuan's value.
Noting that the
Chinese government controls capital account
foreign exchange flows, Guo said banking
regulators and the central bank should opt for
looser market environments and give banks more
leeway to hedge their foreign currency exposure.
