Tall Tales About China’s Banks Hide Economy’s Problems

As China’s growth slows, its banking system is coming under greater scrutiny. The general perception outside the country is that negative real interest rates are causing financial instability, repressing consumption and encouraging excessive investment in capital-intensive industries.

Amplifying this perception was Premier Wen Jiabao’s recent statement that the big four state commercial banks -- Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. -- have a position and earn excessive profits while neglecting small private companies and catering to the interests of large state enterprises.