China entrance as a global financial powerhouse  

The World Bank kept its forecast in Dec 2017 for China's 2018 and 2019 GDP growth unchanged at 6.4 per cent and 6.3 per cent.

China's membership status for European Bank for Development (EBRD) has been approved on 14 of December back in 2015. China has been a longtime stakeholder in many global development financial institutions. The EBRD has a different focus which is to spur development in private sector and promoting market economy democracy. China is stamping its mark on world finance by gaining membership status in differing global institutions. The rise of China is happening which mirrors the higher responsibility undertaken by China in global economic policy drafting especially in Eastern Europe as well as North Africa as part of EBRD operational region. G-20 and China's role to tackle the world financial crisis has helped fortify the basis for approaching China. Asian Infrastructure Bank (AIIB) and New Bank of Development (NDB) is a shining example of new outward strategy taken by China. The Silk Road Funds is also set up for the same purpose for China's ambitious plans to utilize the immense space between Europe.

The combined capital of US$150 billion from both AIIB and NDB will not have far reaching impact in terms of funding for infrastructure for emerging economies and countries. A conservative estimate puts the figure between US$ 1 to 1.5 trillion every year. Silk Road Funds, China Development Institution and CITIC will need to pump more funds, but there will be unmet needs and there are plenty of space for more initiatives. The new strategy undertaken by China will influence its behavior in other existing institutions, especially regional institutions. China is becoming frustrated for not having achieved its objectives for increasing role in global world finance and institutions, such as World Bank and IMF. ADB fell short of China's expectations. AIIB is a major roadblock and challenge to ADB.
China's engagement in these institutions is not just restricted to Asian region. For many decades China has played larger roles in Africa. Many Chinese development banks are all signing up for programs launched by Africa Development Bank. PBOC and Africa Development Bank announced a US2 billion Africa Growing Fund Together, with disbursement tenure over 10 years jointly financed by the two regions. China signed up as a member for Inter-American Bank for Development in 2008. It marks the increasing influence of Chinese ties with Caribbean and Latin America region. It has made co-investment contribution to the development bank. China started as a small insignificant shareholder, similar to EBRD, where it holds a 0.004% stake. Since 1985 from its first year of membership, China took part in eight new rounds of funding for the Africa Development Fund. China now has a 2.052% stake in the latest fund.
China semi government linked institutions and corporations are stepping a gear to engage with global financial establishment. China national wealth fund called State Administration for Foreign Exchange pumped funds into a IFC's Asset Management Company. The objective is to attract long term equity from institutions. It is the major investor in EBRD's similar instrument. Debt capital arrangement for funding is being considered.
Many things are yet to be learned as mentioned by Governor for PBOC. China has many to learn from general development to investment experience. Public and private partnerships formed rapidly around the country have been an easy method to avoid borrowing limits for local government. EBRD can offer much experience for PPP and it is a leaning ground for China. While China is still observing from the start and learning all it could, it will someday have to face the harsh truth around global financial establishment. They are heavily scrutinized by public and political pressure, and China has to navigate cautiously due to many sensitive political issues surrounding the institutions.
Some fear the uprising of Chinese financial maneuvers in the world. Despite heavy engagement and higher voting power, China will not change radically its operations for existing institutions. China can actually learn more by co-operating with global financial establishment and strive to invest better internationally and be more efficient in its capital usage locally.

 

China Economic Growth   

China's Prime Minister, Li Keqiang has been so sure about the growth of Economic of China this year will reach their target. He admitted there might be a little obstacle which will prevent their improvement. But he does believe that it is impossible with a projection that said China Economy will fail their target this year. He and his administration staff pretty confident that they will achieve 6,5 until 7 percent raise as their target. This is contrary to the fact that these years the economy of China has been weakening very fast than the expected, didn't like many years in the past, which make China easily reaching the target of Economic Growth. The numbers of 6,5 percent to 7 percent actually lower than their usual target as the second biggest economic growth rate. Usually, they reach for 10 percent growth. Mr. Li also consider the economic growth for the next five years for within the average of 6,5 percent.

This projection has made the policy maker to wiggle a little. This percentage has some little higher expectations than the experts has predicted. The Chief of Economist of China at UBS AG, which is a financial services company from Swiss, Wang Tao, has said in a Beijing seminar that this year China Economic will growth about 6,2 percent. The prime minister is pretty confident, though there's a fact that the largest economic growth for China in second place last year just reach 6,9 percent, which is the lowest rate for this 25 years.
Prime Minister Li Keqiang, on the annual legislative this year has said that it was the crucial period for China to find itself. And they have to build their powerful drivers to accelerate the development of this new economy.
According to the sources, China has increased a growth on its debt. And this is having been clarified by Prime Minister Li Keqiang. He said that the factor of which cause this to happen is the global economy and overcapacity, also a low on demand at the market, especially for steel and coal industry. They have recover slower than he expected from the global economy problem. But he said again that they already find a method to handle this situation. He proposed the best way to handle this situation is to nurture a supply side economy. This concept will let the manufacture and the services provider be more competitive, but also give its good quality.
As for the steel and coal industry problem, they made a policy to trim the factory overcapacity and cut the employee. Though so, they would not be neglected by the government. He said that they have to provide 100 billion yuan to help the employee who has been layoffs because of this policy until next two years. These funds are intended to pay their severance and to funds the retraining program. It is noted that this year will be 1,8 million employees to be layoffs around steel and coal company.
On his speech on the annual legislative also criticize about zombie enterprise, which is the unproductive industry which is kept alive by the subsidies and the loan. He said that government will handle it in an active method, but also wiser with the use of merger, debt restructure, reorganizations, and also bankruptcy liquidations. He has set 10 million jobs to be generated in urban areas, and he will hold the unemployment until below than 4,5 percent in city areas. He also places an 800 billion yuan to invest in a railway construction and 1,65 trillion yuan to build the roads. He has targeted the deficit of the budget as much as 3 percent of gross domestic product for this year, which is higher than last year for only 2,3 percent.
Changing of Economic Strategy and Timeline  

China is the worlds more populous nation, with it's capital in Beijing and population: 1.4 billion, currency: Renminbi, President: Xi Jinping. Chinese shoppers recently spent a record $25bn in Singles Day, the annual event for single people in China.
E-commerce giant Alibaba promoted the event held on 11 November and many companies offered big discounts for the 24 hour period. Singles Day is four times bigger than Cyber Monday and Black Friday, the US calendar shopping days.

Looking back on how we got here, previous China ambassador from Mexico, made a few comments and insights on the economic and political challenges facing China, drawing his expertise from Mexican history. Mexico and China have distinct differences but Mexican past economic history may give some useful template to gain a deeper understanding of China. Many analysts do not give enough coverage to Mexican history or other emerging nations' economic history.

Many people often take Japan and US as references to compare against China even as the countries have different political institutions. There are also vast different in the nations' wealth, both quantitatively and qualitatively. In accordance to IMF, US GDP per capita is 7.2 times more compared to China GDP per capita and US households income per capita is 11 times more compared to China household income per capita. Japan GDP per capita is 4.8 times more and household income per capita is 6 times more than China. Mexico GDP per capita is 1.4 times more and household income per capita is 2 times more than China.
China's strategy of rebalancing its economy is to close the differences between GDP per capita and household income per capita. There are some advancement in China's rebalancing strategy from the China consumption level. For the 1st three quarters in 2015, national income per capita for whole of China experienced a 7.7% growth. It was 0.1% higher compared to 1st half of 2015. Real GDP seems to be growing at 6.9% per year. Nominal GDP seems to be growing at 6.2%. This seems that household income per capita is growing faster than GDP, about 0.8% more. This is assuming growth in population is stagnant.
The rebalancing outcome is showing up the in the reversal of gap between household income growth and GDP growth. After many years where GDP growth far exceeds household income growth or consumption growth, reversal is important to enable consumption proportion of GDP to return to safe and healthy levels. However, the narrowing of gap is not fast enough to provide a meaningful balance when President Xi steps down at the end of his term in 2023. There are many ways to calculate household income proportion for GDP. There is no one best method. In accordance to established sources, household income as a % of GDP has hit bottom in 2011 at 41%.It is currently on the rise, which will reach 44% in 2014. Another estimate puts the share at 60% in 2011. There is definitely some discrepancy in the data.
If the household income is about 50% of GDP, the % will increase to 53% in 2023 with 8 years of GDP growth at 6.9% and household income growing at 7.7%. The level is only 3% higher and way below the modern day average. China will still be heavily reliant on foreign investment and surplus in its current account. It will take at least 25 years for household income to rise by 10% of GDP, which is the bare minimum for real rebalancing target.
It will take at least 10 to 15 years for sufficient adjustment to China's economy even the gap is closing at two times the speed. Its economy will only return to more sustainable growth with the scenario happening. Unless more radical economic policies are executed to fasten the household income growth and it consumption proportion of GDP, and unless more are being done to step up wealth transfer from state to household sector, we will not be able to see enough rebalancing for another 10 to 15 years.

 

Bohai Steel in China is at Stake  

Bohai Steel is one of the biggest steel factories in Tianjin, China. It has produced 22 million tons of steel every year, including bars and plates. This capacity let the deficit amount of the steel of the nationwide be reduced. The matter of fact, this factory was backed up by the government of Tianjin. BHS is a state-owned business group combined by four state-owned steel manufacturers. The four manufacturers are Tianjin Pipe Group corporation, Tianjin Iron & Steel Group Co., Ltd., Tianjin Tiantie Metallurgy Group Co., Ltd. And Tianjin Metallurgy Group Co., Ltd. The group is a massive production business group which specialized in sintering, iron making, steelmaking, continuous casting, steel rolling and metal productions.

Unfortunately, this factory is rumored to have serious debt problems with hundreds, and even more, of creditors, which cost as much as 192 billion yuan (equals to $28.8 billion US Dollars). The steel executives, the government, the bankers, and others related to the existence of Bohai Steel has been argued about its future. The committee has been formed by the Tianjin government to restructure Bohai Steel, but the bankers seem to have a disagreement with the plan. The bankers become very careful with the committee proposal to extend Bohai Steel loans and cut their debt interest for about 10%. Some of them are claiming to get Bohai Steel's land to be sold due to pay its debts.
The argue keep overwhelmed between the instruments. The government has been persistent to give Bohai Steel an extra chance to get up from its bankruptcy process, which make the governments considering two things; The government asks the bankers to continue to lend their money to Bohai Steel, but the interest is being paid by the government. Or, a debt for equity swap program. This last consideration is given due to the assets of Bohai Steel Factory, which has reached fabulous number (290 billion yuan, which equal to $43.5 billion US Dollar). When a global financial crisis occurred on 2008, Bohai Steel expanding their assets, following government program. The results are, this company has grown this big nowadays.
In the past years, the bankers willing to lend the money to Bohai Steel due to its wealth, rich company. They said that they thought it's going to be safe to lend them some several billion yuan. This conclusion doesn't make the creditor feel safe at all. They thought skeptically that it would be useless to restructure Bohai Steel if the government didn't make a very good management on the overall process and eliciting the transparency of the company. Bohai Steel will be ended like it was, buried in debt, said one of the executives. It has to be effective, otherwise, it's will have a problem with the implementation, said another executive. The government had this almost bankrupt Bohai Steel to cut their production by two third or, equal to 15 million tons in 2016. There is no new group news on Bohai Steel website since 2016.
A hundred bankers or the creditors included Bank of Tianjin, Bank of Beijing, Tianjin Binhai Rural Commercial Bank (Each of them has lent about 10 billion yuan to Bohai Steel), China Construction Bank, Bank of China, and Industrial Bank.
Bohai Steel isn't alone to face their debt. The several other steel company has faced the same problem, and also the coal company. The government has determined their policy for this almost collapsed company, which is to cut their employee and production until below of the market demand. They also ask the financial institution to support these local steel companies.
Bohai Steel not just buried itself in debt, but also the subsidiary company of it. One of the worst is Tianjin Iron and Steel Group Co. At first, Bohai Steel has promised 9 percent yields to their affiliates, which cost 350 million yuan, but then disappointing them and missed the payment. This investment released by Tianjin Iron and Steel. Later known that Tianjin Iron and Steel also cannot repay their debt to the bank since 2011. Tianjin Iron and Steel also operate several companies like Tianjin Tiantie Metallurgy Group Co., Tianjin Pipe Corp., and Tianjin Metallurgy Group Co. Tianjin Iron and Steel has risen its debt from 32,8 billion yuan to 60 billion yuan. They raised 3-billion-yuan loan after sold their high yielding trust to their employee, but also cannot repay them. This makes the corporation in need of help from the bankers.
Tianjin Pipe Corp., a subsidiary of Bohai Steel, which is the only one who didn't cut their production, also in a big debt problem it reached 46 billion yuan. Bohai Steel also has a loan to its trading partners, Tewoo Group. It seems not just like the steel company problem like everybody see from the outside, but also the system problem inside the corporation and their subsidiary which make it decay.
Banks Bracing for Debt-Equity Swaps Revival  

Chinese debt-for-equity swap (DES) agreements remain a focus in 2017, following kick-off last year. It will take time before DES schemes really convert bad debt into equity.

Looking back the goal of the government of China is to recover the liability for equity switches and dispersal of Yuan's trillions of money that has been in a toxic loan even before it made the banks of the country choke. There were programs that were outlined in March 25, which is called the swap program by some of the administrators in Beijing and that may reflect the success of the project between 1999-2004. It is by which the bank took the stakes in more than 580 firms in altercation for the cancelation of the four hundred five Billion Yuan comprising of the loans that has been overdue.

Premier Li Keqiang has told the National People's Congress that a new kind of swaps may restrict the leverage ratio as well as the mitigate financial system risks of the company. He even elaborated that the debt interest in government for equity swaps occurred in the 24th of March during the Boao Forum for the Asian conference of the government and business leaders in Hainan. However, there are lots of alterations that occurred in 2004. The banks of the country for instance are altering far more with bad debts than they used to. The banks had estimated roughly 2 Trillion Yuan worth of non-performing loans on the books by the end of February, that rose in around 35% worth of value from the same time in 2015.
Starting in 2004, the banks without any other choices have been dealing with bad loans thus they sell them at a lower rate to the 4 asset management firms or AMCs of the government. That made them look for investors who will be very much willing to carry all the debts and burdens that they have. However, with bad loans up surging in the current years, the AMCs have become unwilling in accepting bad debts. As Li and some other officials of the government have laid their plans and their willingness to support, there was a bank executive that relays to Caixin that he thinks that the debt equity swaps can actually help the banks. Some other bankers as well as economists say that they are reaching the plan with carefulness.
The sources have told Caixin that the March 25 meeting of the government has relayed fundamentals for the fresh programs, even as of the early part of April, a lot of details hasn't been finalized. Some of the officials that were there came from the State Council, People's Bank of China, China Banking Commission, Ministry of Finance to name some. In the middle part of March, the Chairman said that the technical information must be polished even before the new swap programs may be finalized. There is just one probable obstacle involved and that is the rule that bars the banks from holding the stakes in non-financial firms. However, this issue may also be solved through a special arrangement. The ban might also be waived.
In the debt equity swaps project, there has always been an objection and that is while it is bringing ease and comfort to some banks and firms, it brings the state an added payable. This is according to the statement of Wang Xuedong, he is the chairman of the financial company CDB, it is situated in Beijing. The money came from the taxpayers and that made the program work, he insisted. Tis brought arguments to some of the experts over the new swaps program on ideas that it may just shift accordingly in handling the non-performing loans to the banks from the firms. They are also scared of being overseen and that the rules may bring the country its weakest state. The banks must not be used to handling and dealing with the economic downturn, because they will lose if a company will fail. There must be a balance to withstand the crisis and to surpass it. however, the government can also help by imposing the rules to aid the banks in managing their debts.
Videos of Stock Analysts under Fire   

(Beijing) – Financial and investment circles in China are buzzing over the amateur videos being made by some analysts in the market in order to get the attention of investors. Lately some videos have amateur videos have surfaced on some websites and mobile apps which depict some analysts presenting their views and recommending the investors to buy some certain stocks on in the light of the strong research of their firm.

On April 7, a clip appeared online, showing a young women, who was dressed in traditional Chinese attire, talking about why the investors should buy the stocks of Shenzen-listed ZTE Corp., a company providing telecommunication equipment and services. A stock analyst from Founder Securities, Liao Lei, suggests in a two-minute video that it was worth investing in ZTE because research has shown that its income has been stronger than ever, it is also being managed by a team which is young, capable and ambitious. It also seemed from the video that it was filmed in a living room or a kitchen.
Financial workers widely shared this video on social media. It became popular because of the information being presented by the analyst which impressed the viewers. It should be kept in mind that the industry in which analysts work is marked by professionals who have shun to spotlight and most of them imitate the tone of news commentators.
Several other similar clips have also been uploaded to streaming sites, with analysts representing various brokerages firms including Haitong Securities and Essences Securities recommending stocks to the investors.
Some critics are of the view that the clips are a publicity stunt. According to a public fund manager, he did not even pay attention to what was being said by them in the videos. Moreover, he also added that everybody was doing it as it has started to become a trend and some have been doing it for fun and for them the analysis's quality does not matter.
A researcher form a securities firm said that there has been a fierce competition in some recent years and it was necessary for analysts to somehow catch the attention of investors. Some critics have also cited the article written by chief economist of Essence Securities, Gao Shanwen, which was published a few years back in which he argued that due to a surge in the marketing tricks the quality of the research of the securities' firms has been declining.
One macroeconomic analyst working for a brokerage firm, on conditions of anonymity told that some of his coworkers have turned to social media and streaming websites in order to promote their analyses. He also added that women featured in the most videos that have been quite popular.
These discussions have surfaced when the securities regulator has asked the brokerage firm to properly supervise and manage how their employees advertise their corporate research reports being published, especially on social media.
The notice which was issued by Shanghai branch of the China Securities Regulayory Commisison (CSRC) addressed the brokerages and conveyed that CSRC is concerned because research reports of some securities firm have drawn attention of the investors and made the media as well as the public to question the ethics and professionalism of the analysts and researchers of securities firms.
The regulator's note, which was also viewed by Cixin, did not indicate the reports or firms which published the. A similar notice was also issued by the Beijing office of CSRC, the employee of a security firm said.
The branch of CSRC which is Hubei, in January also criticized the securities firm Changjiang Securities over a report which according to them had a poor title, but it was not elaborated by them.
Minsheng Securities, in December bowed to the pressure being put by the regulators and reprimanded the authors who used slangs in two research reports which were widely circulated. IT said that the researchers made use of quite an inappropriate writing style and eventually caused bad social influence.
Ben Bernanke on China Policy  

Ben Bernanke was the name behind the economic decisions of George W. Bush. He was an economic adviser of the former US president in 2005. After the reign of the former president, he joined the Brookings Institute. His role is prominent, since he became the famous Fellow in Residence while playing the role of the senior adviser to the Citadel in Chicago. During the global financial crisis in 2004, he took the spotlight and drew the attention of the public. That went on until he resigned as the chairman of the US Federal Reserve in 2014. He has been managing the central bank as a government and that brought him to the hardest options. He was the one who acted on the bail out American Insurance Group, yet nobody acknowledged his efforts. He added, if they will not act, then, who will dare to do that? At age 62, he still has some ideas in mind about the monetary as well as the fiscal policies that must be polished.

He was also the man behind the Target Fiscal Policy that has been suggested to China. He implies that it can help in reducing the pressure on the monetary policy and through the years, it will be of help to the entire nation in terms of their developing consumption driven economy. In an interview headed by Caixin, he elaborated the thought and he said that a well conceptualized fiscal investment may boost the productivity in the long run while giving added demand for a short period of time. Compared to some nations, he added, china has the fiscal capability to add more investments. During the interview, there were some questions thrown to him that he answered accordingly. Some of the questions Caixin threw at him are as follows.
Caixin asked, it has been deliberated upon that the Yuan must be criticized a little bit. What can Ben say about it? He answered confidently that he doesn't believe that a big depreciation will do good for the country, it is due to the fact that it will export the deflation to the other parts of the globe and that may mean a rebound on China in a bad manner. If it is not good to anyone, why, if the depreciation is not massive? What if it is just light, is that probable? Are there still any bad effects? The hardship in managing the depreciation problem is still there. If there is a definite, continuous depreciation, then it will just boost more capital outflows, since the citizens will be making an effort to get out of the Yuan as the depreciation went on. It will be best to just have a less foreseeable trail.
What was the idea of Mr. Ben Bernanke about the Yuan internationalization in the past years, has it gained a new pace? What can he say about it? It is by far good enough. That is because it shows the truth that China is really making an effort to come up with a good financial markets with more openness, more rules and more liquid as well. In that sense, Yuan is not yet used in an international manner just the same as the dollars as well as the other monetary are, however, that is not essential at all. But in time, it will be important.
How about Mr. Ben Bernanke's point of view about the China's pushing to enhance the standing of the SDR in an international monetary system? From his perspective, he doesn't think that it is realistic at all, since the SDR will just use a primary international currency. It is not about how much for now, since it does not have any fundamental infrastructure and there are no liquid markets for the SDR assets, since there are for the assets dominating the dollars as well as the euros. He recently said it's probably fair to say that looking at the markets and the economy globally, there are some positive trends. We're seeing, for example, pretty good performance in China, we're seeing some pickup in Europe, even Japan is doing better. So the increased optimism, including the optimism in markets, is not solely due to the expectations of the new administration's policies. It's due in part to a somewhat broad-based improvement in the global economy.
Lastly, what Mr. Ben Bernanke thinks about digital virtual currencies in the next years to come? From his viewpoint, technology wise, he thinks that the technologies do offer a lot of possibilities in terms of improving the payment systems and how people will go through their daily lives with the transactions. Also he thinks that the non-government sponsored currencies such as bitcoin will have a place in the international financial system. But people will still go on in using dollars, Yuan and even euros and the technological advancement will play a vital role in making the payment system more effective and organized.
Multiple for China’s Economic Growth  

China's economy grew 6.9 percent in the first quarter of 2017. The government is aiming for growth of around 6.5 percent in 2017. Lets take a look back at China's Economic Growth. America Enterprise Institute leading economic analyst and researcher published a write-up on a 2014 study made by Credit Suisse to measure China's household wealth by geographical regions and sovereigns. In deciding on the argument whether China will surpass US to become the world biggest economy, the only right way is to compare the GDP between the two rich nations. Some advocated the use of nominal GDP using prevailing exchange rates for being the better measure. Others preferred on the use of GDP adjusted by Purchasing Power Parity (PPP). The analyst do not agree to the use of the above 2 measures due to various reasons.

Debate has been ongoing as to which country's economy is the largest currently. GDP adjusted by PPP will put China on the top spot ahead of US, while other indicators will put US ahead of China. The news and evidence used to back China's economy as the largest is to emphasize the importance of competition in Sino-America and single our China's economic threat and might. A undisputed fact is China has been enjoying higher economic growth compared to US. It is a matter of time before China will surpass US. One indicator points otherwise, which the the national wealth. From 2008 to 2014, US came out tops in terms of total national wealth amount.
Estimate by Credit Suisse puts private wealth for Americans at $42.9 trillion. China's national wealth is only at $4.7 trillion. This implies US is about 9 times wealthier compared to China. GDP ratios point a very different picture. At end 2014, China's official GDP was $9.8 trillion while US official GDP was $16.77 trillion, which is about 2 times more compared to China.
The phenomena and observation might confuse many economists at first. GDP was expected to measure wealth created for the period of measurement, and is similar to total income produced by a thriving enterprise. Credit Suisse estimation methodology is not made known. If it is almost proportional to the economy's assets, together with labor force for each country from US or China to manufacture goods and provide services, American income generated is 5 times more valuable compared to Chinese income on a per dollar basis. In share market terms, US had a P/E ratio of 5 times compared to China P/E ratio. The ratio is not accurate but it is possible. US should have a higher ratio than China, but the exact multiple of 5 times is hard to ascertain. The argument for China overtaking US economically is not intelligent or fascinating. However the argument is relevant to highlight the Chinese economic growth and the right thinking behind it.
GDP is the total measure of all goods & services produced in an arbitrary period of measurement, and it accounts for improvement and deterioration of capital stock. OECD has their own definition which is sum of all residential and institutional economic units involved in production and includes taxes but excludes subsidies and miscellaneous products.
Many researchers are developing around the multiple ratio ideas, hopefully to understand it better in the future years. The analyst article is a useful trigger point for thinking about the economy of China. It is not so much about trying to figure out which economy is the largest in the world, but to determine the growth quality based on the value being assigned to existing and forward growth. Political leaders from Washington DC and Beijing can implement better economic policies based on a more informed understanding on the growth measurement. China could use the new lights shed on the types of growth for their economic reform process. 
Bank Robbery in China Related Bill of Exchanges  

Bill of exchanges is one of the most popular payment systems in China nowadays. It becomes one of the favorite because its simplicity, match for small businesses, and traded between banks are allowed. Besides of the advantages, it is also open to chances of crime, including fraud and robbery. Two of the most explicit of this type of crime are happening to ABC Banks (Referred to Agriculture Bank of China) and China Citic Bank, two of the biggest bank in the country.
On January 2016, ABC Bank has lost 3,8 billion yuan bills of exchange. Police investigated this missing and few days later, they reported that 969 million yuan bills of exchanges was also lost from Citic Bank, located in Lanzhou, Gansu Province. From the investigation, police really positive that there must be an insider involve at this robbery of Bill of Exchanges. For the result from these two accidental case, the central government has elevated the rule of bills business by their regulation. CBRC (China Banking Regulatory Commission) had reminded the bankers on December, that there's a rise in number for fraud involving Bills of Exchanges and urge them to be very careful on carrying this business.
The investigation including the attention to the use of the fake document and the use of the cash from bills to invest in stock market. At June of 2015, the data has shown about 8 trillion yuan has lost from the interstate bank. This lost, nonetheless, are violations of Bank bills business. This procurement about bills financing has to be supervised more with professional included, not only by government regulators. There was a professional on bills financing, but only until the year of 2000. Their job is just to mediate between bank and companies who needs financing, and getting profit from that.
Bills of Exchange has a characteristic of opaque and loose, making abundantly increasing of the agents in China, and it also has the impact to increase this type of financing business. Central Banks has a report that said that bills of exchange have raised on value by 56,9 percent since 2004 until last years. This elevated has made a lot of transaction on paper, not a computer. It has make Bills of exchange become susceptible, or risky to crime. To handle this situation, CBRC makes several endeavors, which is to tighten the regulation of bills of exchange, and the central bank is trying to change the transactions into a digital format. The experts also said a lot about protecting banks from this fraudulent, one of it is the banks need to make their own supervisions to their own staff and management.
ABC and Citic Banks, also include the other few biggest banks in the country has suspended for a while for the transactions related to bills of exchange and doing some internal review. The small bank also becomes alert to the bill of business transactions. One of the sources also said that if people and paper are watched closely, then the business of bills will be okay. This is worth to try since Bills of exchange has made a significant improve to commercial banks profit, and make the share of the market grown from 32 percent in 2010 to 41 percent in 2014.
As the result of the investigation by the police department, they had arrest two suspect, which is the employee from the ABC bank as the offender. They have been accused of stealing. Later known that they were stealing those 3,8 billion yuan in the form of bills of exchange from the safe, and then stuffing it with a newspaper, exchange the bills for the cash and buy shares. There are several things unknown inside this stealing process because the bankers still wondering how both of them doing that stealing without any help from others. The police have done some more interview and investigation which deliver to the fact that the executives of the ABC Banks are also involved during the stealing process. The police tracing where the bills go to, and found it on Minsheng Bank, with the intermediate of Ningbo Bank. An agent from Chongqing is also involved. By the interview, nothing has found wrong with the bills transactions.
Police found the similarity with the offender of the Citic Bank, which also doing by the insider of the bank, but with a different mode. The offender replaces the bills with a fake document, and then sells it with discount price, more than once. One of the bankers said it is pointed out that bank procedures have been in problems to handle the bills. This is causing an open room to the robbery. The CBRC and Central Bank as the vigilance of this type of crime have made a remembrance tighten the rules of the transaction, but a lot of banks has neglected it. The bankers have put aside the risk, and choose to still have this transaction of bills of exchange because it may seem safer than the traditional transactions, which is writing the loans.
Anbang huge ambitions for the world  

Anbang Insurance Company made it to the headlines with New York's Astoria Hotel acquisition. It is in the race to bid for the 8th largest hotel chain, Starwood Hotels & Resorts Inc. Anbang's deep funding reserve helps fuel the proposed buyout for US$14billion. Anbang earned US$9.2billion from domestic and property insurance premium, way below the standard premium cash flow typically earned by industry heavyweights China Life or Ping An, according to CIRC (China Regulatory Commission for Insurance). Anbang also earned US$6billion by selling investor insurance. It has almost 80% of market share for investment products pushed to the retail segment that has almost 10% yield. Revenue is a small proportion of its assets totaling US$292 billion in 2014. Its cash pile is being used to fund its acquisition spree with the latest being Starwood. Anbang has not revealed it financing scheme for the takeover of Starwood with partner Primavera Capital, a private equity outfit and London company J.C. Flowers. Regulators may halt the deal on ground of investment restriction for insurance companies to invest more than 15% group assets for overseas investments.
Anbang forked out US$2billion for Waldorf Astoria, and bought Fidelity and Guaranty Life with US$1.59billion cash. In 2014, Anbang acquired Fidea, a Belgium based insurer with 220million euros and forked out 219million euros for Delta Lloyd Belgium. Blackstone sold its portfolio company stake in Strategic Hotels and Resorts to Anbang, which operates Four Seasons to Intercontinental hotel chains, for about US$6.5billion. The deals are subject to US and Chinese regulatory commission approvals. Anbang's total investment outlat for overseas purchases totaled US$27billion to-date. It has yet to compute the exact amount it could invest overseas. Non insurance company assets are supporting Anbang fianancially. The firm has major shareholding in local domestic banks and various property development outfits. Chengdu Bank was the first banking company acquired by Anbang. There are little insurance holdings. In 2014, property insurance and life insurance department has 329billion yuan in total compared to 1.9trillion assets held by Anbang.
Anbang is in competition with Marriott for the 1,222 hotel chains owned by Starwood, and that includes Sheraton as well as Westin brands. Merger between Marriott and Starwood will form the biggest hotel chain in the world. In March 2016, Anbang's offer of US$14billion is US$400million more than Marriott. Anbang joined in on the bidding when Starwood management was looking to dispose the chain into the hand of Marriott, weeks before shareholders voting. Starwood will pay Marriott a release fee if Anbang succeeds. Other Chinese entities are keen on Starwood, for instance China Investment Co., Jinjian International Corp and HNA Group. None made a firm offer. Cinda Securities analyst head commented Starwood has prime assets and solid financials. Hotel business has been providing good investment returns, around 5%. Anbang wants higher return on its cash pile. It is a good time for insurers in making investments.
Anbang had been incorporated in 2004 with registered capital of 500million yuan. Largest shareholder was SAIC Motor Co with 20% stake. Business registration files showed Anbang having 39 investors, all obscure and diverse. The addresses were similar for certain shareholders, and they have some form of connection to the Chairman who has good connection with central government. Sinopec bought 20% of Anbang and became a major shareholder in 2005. Anbang registered capital was increasedto 62billion yuan. Its equity is evenly distributed. There were changes in shareholding where SAIC reduced its stake to 1.2% while Sinopec reduced its stake to 0.5%.
Anbang was rearranging shareholding structure to comply with CIRC regulations. In the old rule, one investor cannot hold a stake exceeding 20% for insurance company. In the new rule effective 2014, one investor can hold up till 51%, subject to approval. Anbang focused on investor insurance sales for retail investors and has been a significant revenue source. It is a market leader with 80% market share. However the plans are short term (less than a year) and maturities are due. Investor expects repayment in full plus investment returns and yield. This poses a risk to Anbang, as China faces economic slowdown. Thus Anbang has been looking overseas for acquisition and growth, even it faces potential non-approval from CIRC. Anbang has shaken off the regulatory scrutiny with more than 1trillion assets in yuan, well sufficient for future foreign acquisitions.
  
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