Jiang Jianqing
China should divert part of its burgeoning foreign exchange reserves to commercial banks so that they have more financing power to support the overseas expansion plans of domestic firms, Jiang Jianqing, chairman of Industrial and Commercial Bank of China (ICBC), said yesterday."Borrowers can repay the loans in yuan, something that would help mop up the excessive liquidity in the domestic economy," Jiang told a financial forum held by China Society for Finance and Banking, a research institution affiliated to the central bank.
With more Chinese companies charting plans to invest and expand in the overseas markets, it is also essential for domestic financial institutions to support these endeavors, the ICBC chairman said.
"If we could make a small step forward, Chinese companies would take a big step in going overseas," he said.
The chairman also said ICBC had no plans to buy a stake in Taiwan's Cathay Financial Holding Co. Media reports had earlier said ICBC planned to spend $3 billion to buy 20 percent of Cathay Financial.
Jiang's comments on forex reserves come at a time when there has been a lot of discussions on how to effectively use the funds, pegged at around $2.3 trillion by September this year.
Sources indicated that China Investment Corporation (CIC), the nation's $300 billion sovereign wealth fund, could get a fresh $200 billion capital injection from the forex kitty early next year to fuel its overseas investments in natural resources, technology and consumer-centric sectors.
The fund is also the largest shareholder of the nation's State-owned banks. CIC holds 35.4 percent, 57.1 percent and 67.5 percent respectively in ICBC, China Construction Bank and Bank of China through its domestic investment arm Central Huijin.
The record-lending spree over the past year has left most of the Chinese lenders strapped for funds. Financial circles feel that Jiang's suggestion could well be a proposal aimed to boost the capital requirements of major State-owned banks.
Jiang, however, was quick to point out that the nation's biggest lender on its part would reduce its lending next year and reiterated that there was no immediate pressure for the bank to shore up capital.
ICBC's capital adequacy ratio stood at 12.3 percent at the end of September this year, against the statutory requirement of 11 percent for large State-owned banks.
