Banking

China shares rebounded from a 33-month intra-day low to rise 0.2 percent gain on Wednesday, leading some analysts to hope for more gains by Friday to limit their losses during 2011.

The Shanghai Composite Index, which closed at 2,170 points, stayed in oversold conditions on the charts. It is down 22.7 percent this year, following a 14.3 percent decline in 2010.

Despite Shanghai snapping a two-day losing streak, prevailing weakness in mainland markets weighed on Hong Kong, which reopened on Wednesday after a Christmas break.

Profit growth of Chinese listed banks is likely to slow down to around 20 percent next year, according to a report released by the Bank of Communications (BOCOM), the country's fifth biggest commercial bank by asset scale.

The deceleration was mainly caused by a decline of growth in interest-earning assets, due to stable credit growth, a slowdown in foreign capital inflow and an increase in funds flowing out of the banking system, said the report.

The bank estimated that interest-earning assets of Chinese commercial banks will rise by 14 percent next year and contribute 15 percent of total net profit, compared with a 17 percent contribution in 2011.

The renminbi is coming close to having a reasonable exchange rate, Chinese Commerce Minister Chen Deming said at the G20 summit.

Chen told reporters on Thursday that the yuan has risen by about 30 percent against the US dollar since 2005, and China's trade surpluses are declining when compared with the value of its gross domestic product.

In September, selling pressure appeared for the yuan, showing that the market perception of the currency is starting to change, Chen added.

The Chinese yuan closed at a record high against the dollar on Friday. Its reference rate was set at 6.3165 on Friday, the highest it has been since July 2005.

A sharp rise in China's yuan currency might cut the U.S. trade deficit by as much as one third and create enough American jobs to put at least a modest dent in the unemployment rate.

Then again, it may also lead to a destabilizing spike in Chinese unemployment and spark a trade war that drags the global economy back into a deep recession.

These are the conflicting forces U.S. lawmakers must consider as they decide whether to pass a bill which would pressure Beijing into letting its currency rise more rapidly.

The debate over whether China's currency is undervalued is essentially closed. Beijing readily acknowledges that a gradual yuan appreciation is in its best interest, and it has allowed the currency to rise by about 6.5 percent since June 2010.

Chinese Premier Wen Jiabao urged stronger financial support for cash-strapped smaller businesses, the state-run Xinhua News Agency reported on Wednesday, in the latest indication of the toll China's inflation fight is taking on its small and midsize businesses.

Mr. Wen made the remarks during his visit to China's eastern Zhejiang province on Monday and Tuesday, according to Xinhua. Zhejiang is home to numerous small entrepreneurial businesses.

Smaller enterprises should be a priority for bank credit and enjoy more tax preferences, Mr. Wen said, according to Xinhua. He added that banks should set targets for loans to small companies, reduce the cost of credit for them and allow them a higher nonperforming loan ratio.

To prevent the funding shortage from spreading, Mr. Wen also called for better regulation of private lending, Xinhua said.