Beijing  (AsiaNews) – According to the Xinhua press agency,  45 billion dollars in foreign-exchange reserves, accumulated recently thanks to a surplus in exports, will be utilized to save two major Chinese banks: the Bank of China and China Construction Bank, respectively the countries second and third top banks.

An unidentified state assembly official said that the banks will use the funds to increase capital, to bail out losses due to non-performing (bad) loans and to restructure banks into stockholding companies.

Again according to Xinhua, both banks will become "modern companies featuring sufficient capital, strict internal controls, safe operations, good service and good economic returns." The Bank of China said it intends reduce the ratio between bad loans and its lending to less than 10%, with a drastic reduction compared with the current 18% figure. In December, an unidentified Bank of China official said the bank would receive 20 billion dollars in relief funds.      

For years he country's Big Four state banks (the other two being the Agricultural Bank of China and Industrial and Commercial Bank of China) have tried to reduce the 400 billion dollars in bad loans accumulated during 5 decades of financial policies imposed by the government on companies lacking income and sound financial management. According to western observers, however, the amount of bad loan debt is well higher than what is officially declared and constitutes 45% of all Chinese bank assets. As for the rest, a loan of at least 1.9 trillion yuan was already given to the 4 banks, which were then disbursed to several companies and government projects as non-performing loans.

Some observers at the Hong Kong and Shanghai Bank (HSBC) have defined the move as "a good measure to save the economy". Yet others state that "they've thrown money down the toilet with their banks before in China. What should it be any different this time?" Many economists have for some time have pleaded for reform in the banking system, which is still highly protected by the state and an array of unprofitable investments. 

Currently China has the second largest accumulation of foreign-currency reserves in the world, estimated at 401 billion dollars last October. Thanks therefore to export-based economic development and to an exchange rate set arbitrarily by the government, the communist regime thus counts on smoothing out all it own failures. Yet, the cost of its failures, in this case, ends up being paid for by Chinese workers who, in being practically reduced to a state of slavery, are compensated with miserable salaries and make China's products competitive abroad.  On the other hand, there is the rest of the world's responsibility, in the name of an abstract faith in free market exchange, to assist in giving inertia to reset the country's manufacturing capacity and industrial profits (MDO)

• china
• economy
• banking
• system
• workers
• rights
• loans
• bankruptcy.