, Columnist
China's Banks More Squeezed Than You Think
A peek into the shadows shows that deposit cover is falling short.
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In their obsession with China's falling foreign-exchange reserves, investors may be ignoring a more painful Catch-22: a growing shortage of bank deposits. Left unaddressed, the lenders' liquidity squeeze could leave them dangerously exposed to fickle wholesale financing, while trying to ease the shortage could worsen capital flight.
Take Bank of Jinzhou Co. With just 0.3 percent of the $22 trillion in assets of the 35 publicly traded Chinese lenders, the bank appears remarkably liquid. Its 57 percent loan-to-deposit ratio in June was below the median reading of 67 percent. The Hong Kong-listed institution's 200 billion yuan ($30 billion) deposit base offered ample support to a loan portfolio only a little higher than half that amount.