No. 335-6, Oct 9(1)

The Good and the Bad of State Banks Going Public
Editorial
On Sept 25, China Construction Bank, became the latest state-owned bank listed in the A-share market. It follows in the footsteps of the Industrial and Commercial Bank, Bank of China, and the Bank of Communication, who have all moved to strengthen their coffers via public listings. While positive in many regards, we argue that this trend has the downside of exacerbating excess liquidity in the market. Also, while this enables banks to raise substantial funds for future development, it also increased the capacity of banks in providing credit as a means to generate profits for their shareholders. An expanding credit market could set off a chain reaction of re-investment into the stock market, thus pushing up inflation.

Chinese Formula in Surviving Inflation
Cover story
This week's feature series examines how Chinese are preparing stave off the effects of inflation on their savings, with special emphasis on how Chinese of different socio-economic backgrounds invest and acquire assets to prepare for a rainy day.

Financial Policy to Cool Overheated Property Market
News, page 3
The Government has tightened financial controls to curb speculative and opportunistic investments in the property market, settin a higher bar for down-payments purchases of second properties and a higher capital-loan ratio for developers seeking credit from banks to fund projects. Policy announced on Sept 27 aims both to restrain developers from withholding land and property to manipulate the market and reduce risk factors for the creditors. It raises the bar on down-payment for a second home to 40 percent of the property value; similarly, units for commercial use require 50 percent. Meanwhile, developers must have a capital equivalent to 35 percent of the cost of a project to qualify for loans.