August 08th, 2007 | Chinadaily.com.cn sub prime loan crises may affect some Chinese banks
The latest US sub prime loan crises didn’t render Chinese banks safe. A
US report said Chinese financial institutions had bought US$107.5
billion worth of US mortgage securities by the end of June last year,
accounting for 47.6 percent of similar investments amongst Asian countries.
And a part of those may be the highly risky sub prime loan securities,
the Shanghai-based Oriental Morning Post quoted an industry insider as
According to a report from the United States Department of the
Treasury, several large banks from China have bought sub prime loan backed
Bank of China (BOC) was thought to be the biggest buyer. Sources said
that by the end of last year, BOC held US$90.1 billion worth of US
bonds. Assuming five percent of them are securities related to sub prime
loans, capital at risk could total in the multi-billion dollar range.
However, BOC officials didn’t expect such a serious outcome. Zhu Min,
vice president of the bank, said BOC did invest several billion dollars
in the sub prime loan bonds, but the loss is thought to be only
millions, only slightly impacting the bank’s overall operations.
The report also said investment from Industrial and Commercial Bank of
China, Bank of Communications, and China Construction Bank also
included sub prime loans, although most of them said the amount was not large
enough to seriously affect revenue.
Chinese banks may want to remain vigilant against the looming
depression trend in the US property market.
The US American Home Mortgage Corporation, the nation’s second largest
mortgage loan institution, filed for bankruptcy due to financing
limitations from banks. In addition, major mortgage loan companies also
started to reject new loan applications. These events should serve as a
warning call for financial investors from China.
By Ding Qi