Banking

The framework for bringing yuan funds raised offshore to mainland China will be in place by the end of this year, the Hong Kong Monetary Authority said Monday, adding the move could increase the issue of bonds and bank loans denominated in the currency in Hong Kong, the offshore yuan hub for China.

While on an official visit to Hong Kong, Chinese Vice Premier Li Keqiang on Wednesday announced several initiatives aimed at easing the flow of offshore yuan back into mainland China. Mr. Li suggested Beijing intends to follow through on the plans for what has been dubbed yuan foreign direct investment, but he didn't give a timeline.

China Construction Bank Corp, the world’s second-largest lender by market value, said first-half profit jumped 31 percent to a record as credit demand climbed.

Net income rose to 92.8 billion yuan ($14.5 billion), or 0.37 yuan a share, from 70.7 billion yuan, or 0.3 yuan, a year earlier, the Beijing-based lender said in a statement to the Shanghai stock exchange yesterday. Profit was in line with the 91.5 billion yuan median estimate of eight analysts surveyed by Bloomberg News.

Construction Bank joined rival Bank of Communications Co. in reporting record first-half profit as loan demand climbed in the world’s second-largest economy. Lending profitability also improved after China raised interest rates three times this year. Still, the lender’s Hong Kong-listed shares lost about a quarter of their value this year on concern defaults may climb.

ICBC

Industrial and Commercial Bank of China (ICBC), the world's biggest lender by market value, said Friday it had agreed to pay $600 million to take a lion's share of assets controlled by Standard Bank Group Ltd in Argentina, to extend its businesses in South America.

The Chinese bank will acquire 80 percent of Standard Bank Argentina and its two affiliates, a fund management company and a business service provider, from Standard Bank London Holdings Plc (SBL), a unit of the Johannesburg-based lender, and two Argentina shareholders, the Werthein Sielecki families.

China’s foreign exchange reserves, already the world’s biggest, soared again in the second quarter, adding to inflationary pressure and highlighting the risks in Beijing’s policy of holding down the value of its currency.

Reserves are a key indicator of central bank intervention in the currency market because they reflect how much foreign exchange it has purchased in order to stabilise the renminbi. After jumping $197bn in the first quarter, reserves were up another $153bn in the second quarter.

That influx of cash compounds China’s inflation troubles. Consumer prices were up 6.4 per cent in the year to June, the highest in three years. Although many analysts expect inflation to slow over the remainder of the year, the accumulation of reserves lays the groundwork for a continuation of fast money growth and so will limit the scope for any easing of price pressures.

“The current intervention of the People’s Bank of China has been piling up more and more foreign exchange reserves. This is not sustainable,” said Li-Gang Liu, head of China economics at ANZ Bank.

The People's Bank of China (PBOC), the central bank, announced on Wednesday that it will raise bank's benchmark one-year borrowing and lending rates by 25 basis points beginning Thursday.

This is the third time for the central bank to raise interest rates this year.

Meanwhile, the central bank has hiked the reserve requirement ratio for banks six times this year.

Inflation data for June will be released on July 15 and many economists forecast it will hit a new high above 6 percent.

The CPI rose by 5.5 percent in May from the previous year, setting a 34-month high and well above the government's yearly inflation ceiling of 4 percent.