"CHINA'S ECONOMIC GROWTH" A BIRD'S EYEVIEW

Since the initiation of economic reforms and trade liberalization 30 years ago, China has been one of the world’s fastest-growing economies and has emerged as a major economic and trade power. China’s rapid economic growth has sharply improved Chinese living standards and helped raise hundreds of millions of people out of extreme poverty. Trade and foreign investment flows have been major factors in China’s booming economy. In 2008 China, was the world’s second largest
merchandise exporter and third largest importer. Over half of China’s trade is conducted by foreign-invested firms in China. In 2008, foreign direct investment (FDI) in China totaled $92 billion, making it the destination for FDI among developing economies. The combination of large trade surpluses, FDI flows, and large-scale purchases of foreign currency (especially dollars) has helped make

China the world’s largest holder of foreign exchange reserves at $2.3 trillion.
The global economic crisis began to impact China’s economy in late 2008. After growing by 13% in 2007, China’s real GDP slowed to 9.0% in 2008 and to 7.1% in the first half of 2009 (year-onyear basis). China’s trade and inflows of FDI diminished sharply, and millions of workers reportedly lost their jobs. The Chinese government has sought to boost the economy by implementing a $586 billion economic stimulus package (largely aimed at infrastructure projects), establishing easy money policies to boost banking lending, and providing assistance to various industries. Such policies have helped stabilize China’s economy; real GDP is expected to
grow by over 8% in 2009—far higher than the expected growth of any other major economy.

BASEL- III ON BANKING SUPERVISION

The Basel Committee for Banking Supervision and the Financial Stability Board released two reports on the economic impact of BASEL 3, a new set
of more stringent rules for banks' capital and liquidity. Fending off
complaints from the banks that tighter standards will stifle lending,
the reports suggested that the long-term effects of the measures will
be clearly positive, since they will make financial crises less likely.
The final measures will be presented in November at the G20 summit in
South Korea
The Institute of International Finance, a lobbying group, reckons the proposed “Basel 3” rules might knock 3% off the absolute level of rich-world GDP by 2015, a scary result. A study by the French Banking Federation concluded that the long-term level of GDP would be 6% lower in the euro area.
Basel club of bank regulators, which released detailed new analysis on August 18th. It reckons its new rules will boost the economy in the long run and only slightly dent it in the short run. Stephen Cecchetti, its chief economic adviser, says there were “scores” of economists working on the project. The aim, he says, was “to do a thorough job, with the best technology and using the best people in the world at t

Bank of England says Britain seeing signs of improving credit conditions

There are tentative signs that credit conditions for some British businesses and households may be starting to improve, a Bank of England report suggested yesterday.
latest credit conditions survey found that lending to the corporate sector had increased in the second quarter and lenders expected levels to rise again in the coming three months.
The availability of secured credit to households over the same period also increased, and was expected to rise further in the third quarter. The Bank said the increase in lending in both areas was driven by the improved cost and availability of funds.

"While concerns about the economic outlook had continued to bear down on credit availability, the impact had been smaller than in previous surveys," the report added.
However, despite the rise in credit available to the corporate sector, it did not increase as much as lenders had expected and the commercial property sector in particular experienced a "significant reduction" in credit availability.

US Federal Reserve says increased banking competition has led to more lending

The latest lending survey from the US Federal Reserve has shown the first slackening in lending conditions for smaller American companies since late 2006 as competition between banks increases.
While small and medium-sized British business still complain of a lack of new credit from UK banks, US lenders have begun easing standards and reducing pricing for the first time in nearly four years.
According to the Fed's report, which surveys loan officers at 80 banks, the main reason for the change has been an increase in competition for business this year. Related Articles
The findings add weight to the argument that increasing competition in the banking industry would help improve the flow of credit to British businesses.

BANK FAILURES IN USA

The US banking system continues to wobble under financial woes, with 13 banks on an average going belly up every month in 2010.

Notwithstanding the slow economic recovery, more banks are expected to fold up in coming months, especially due to high unemployment rate, which is hovering over nine per cent.

So far this year, 90 banks have been shut down by the authorities, which translates to an average of around 13 failures every month.

Four entities including Home National Bank, Bay National Bank, USA Bank and Ideal Federal Savings Bank, failed on July 9.

According to the Federal Deposit Insurance Corporation (FDIC), which insures deposits at over 8,000 banks, these failures would cost the agency more than USD 81 million.

The jobless rate in the world's largest economy stood at 9.5 per cent in June. High unemployment has resulted in rising defaults, primarily hitting small and medium banks.

In May and June, 22 banks bit the dust while the count of collapses had touched 23 in April, the highest for any month this year. Official figures show that 41 banks were closed down in the 2010 first quarter.

Going by the FDIC, the count of 'problem' banks -- those at risk of failing -- climbed to 775, the highest in nearly 17 years, in the first three months of 2010. The figure was at just 702 at the end of last year.

Last year, a whopping 140 banks went out of business. Recently, FDIC chairperson Sheila C Bair had warned of more bank failures since the banking system was facing many problems.

Exchange rate fluctuation has inflated India's external debt by USD 18.7 billion (about Rs 90,000 crore) during the three-month period RBI

After taking into account the valuation effect of USD 18.7 billion dollars--the changes in the value of assets India holds abroad, minus the changes in the value of domestic assets held by foreign investors--the country's external debt during the the three-month period rose by USD 8.7 billion to USD 251.4 billion dollars as on December 31, 2009.

In rupee terms, India's external debt worked out to be about Rs 12 lakh crore.

The RBI report said that at the end of December, the external debt basket comprised 52 per cent of dollar denominated debt, followed by rupee debt at 17.2 per cent, yen debt at 12.7 per cent, Special Drawing Rights (SDRs) issued by IMF at 11.4 per cent and Euro at 4.2 per cent among others.

BMO Hires Ex-Lehman Banker Hoffmeister for U.S. Investment Bank

April 1 (Bloomberg) -- Bank of Montreal hired former Lehman Brothers Holdings Inc. banker Perry Hoffmeister to head the U.S. investment banking business of Canada’s fourth-biggest bank.

Hoffmeister will start April 19 as head of U.S. investment and corporate banking with BMO Capital Markets, the Toronto- based lender said today in an e-mail. Hoffmeister worked for 21 years at Lehman, with his last job there as co-head of investment banking for Europe and the Middle East.

The announcement comes two days after BMO Capital Markets said Dominic Petito, co-head of U.S. investment and corporate banking, will retire June 30.

Hoffmeister will report to William Butt, the firm’s global head of investment and corporate banking, who’s based in Toronto.