The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney is part of the Euromoney Institutional Investor PLC
Northeast Asia

China debt: Baoshang bailout rattles lenders

The move prompts questions about which other banks could be at risk, and forces the central bank to guarantee Bank of Jinzhou’s issuance of short-term debt.

By Rebecca Feng

The People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) placed Baoshang Bank, a medium-sized regional bank in Inner Mongolia, under the control of China Construction Bank, one of the country’s four megabanks, on May 24.

The PBoC says the bank has “serious credit risk” and pledged to guarantee all retail deposits, no matter how large. Repayments of institutional deposits and interbank liabilities larger than Rmb50 million ($7.2 million) are up for negotiation.

Ting Lu_160x186

Ting Lu, Nomura

The move appears to be the natural consequence of leverage building up in China’s financial system, despite efforts by the government to reduce borrowing by banks and corporations. Many offshore bankers told Asiamoney they thought the bailout was a one-off, but the impact on the debt markets was noticeable immediately.

China’s big banks have become extremely reticent about buying negotiable certificate of deposits (or NCDs), on which Chinese small and medium-sized banks depend heavily for refinancing.

Smaller banks cancelled their issuance plans in the week after Baoshang’s bailout.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree