Banking

On Tuesday, the Shanghai Securities News reported that a Chinese official at the State Information Office hinted that the country's central bank, in order to stem deflation, will lower bank interest rates.

Consumer and producer prices have been declining in China in the last several months, but most analysts think inflation will return by the end of the year when the economy picks up speed due to Premier Wen Jiabao's stimulus program. In short, no one actually believes deflation is a problem.

Then why is Beijing talking about dropping rates to engineer price increases? Here's a theory and a prediction: The Chinese government will, in reality, mount an effort to increase the profitability of the largest state lenders by reducing rates paid to depositors, thereby lowering the banks' cost of funds. Yet these gigantic financial institutions--one of them dethroned Citigroup last year to become the world's largest commercial bank ranked by market value--have been reporting handsome profits lately.

Net profit of China CITIC Bank grew 60.7 percent year-on-year to 13.3 billion yuan ($1.95 billion) in 2008, announed the bank in its 2008 annual report released on Tuesday night.

The Beijing-based bank said its assets quality continued to improve last year, with non-performing loans ratio dropping by 0.12 percentage points...

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Read more on CITIC Pacific chief, Larry Yung Chikin, quits for currency probe and faces 14-year jail time

A US court has sentenced two Chinese officials and their wives, who fled China eight years ago after hatching a plot to embezzle $482 million from Bank of China, to up to 25 years in prison.

A federal judge in Las Vegas sentenced Xu Chaofan to 25 years and Xu Guojun to 22 years in prison on Wednesday. The two were managers of Bank of China's Kaiping branch in Guangdong province.

Their wives were sentenced to eight years each, and the quartet was ordered to pay $482 million in restitution.

The four were found guilty of hatching a plot in 1991 and continuing their efforts to execute it even after fleeing to the US in 2001. They were arrested in the US in October 2004.

According to a statement from the US Department of Justice, prosecutors charged them with laundering money through Hong Kong, Canada and the US.

A third banker, Yu Zhendong, was part of the conspiracy, and fled to the US in 2001, too. But he pleaded guilty and was later deported to China and jailed for 12 years in 2006.

During the trial in Las Vegas, the court heard how the two Xus created a series of shell corporations in Hong Kong that were used to funnel cash into personal bank and investment accounts.

Some of the money ended up on gaming tables in Las Vegas casinos, where the accused would frequently lay bets of up to $80,000.

Evidence showed the Xus' wives helped them launder the proceeds of the fraudulent scheme and violated US immigration laws by entering the country illegally and then securing US citizenship through fraudulent marriages with US citizens.

The two men were also convicted on three counts each of visa fraud.

The verdict shows the border is not an obstacle for justice to prevail, US law enforcement officers said.

"We will hold fully accountable those foreign nationals who abuse the financial systems of their home countries and who then, by fraudulent means, seek to live richly off their ill-gotten gains in the US," US government prosecutor Lanny Breuer said in the statement.

"Financial crimes like these know no borders," Kenneth Kaiser, director of FBI Criminal Investigative Division, said. "By partnering in investigations such as this one, the FBI and our law enforcement partners in the US and abroad can combine our collective resources to most effectively attack this worldwide criminal threat."

Huang Feng, a law professor in Beijing Normal University and an expert on extradition, said the case is an example of successful cooperation between law enforcement agencies of China and the US.

Since China does not have an extradition treaty with the US it is very difficult to bring back Chinese suspects to stand trial in the country, Huang said. The deportation of Yu was an exceptional case because he pleaded guilty and volunteered to return to China.

"But today's verdict shows that even if we cannot bring corrupt officials back to China, they can still be jailed through the joint efforts of the two countries' law enforcement agencies," Huang said.

"It's a good example of how to deal with similar cases."

The two Xus and their wives will be jailed in the US, he said, but it is also possible that they could be deported to China to serve their sentences.

China has been pushing the US and Canada to sign extradition treaties because scores of corrupt Chinese officials have fled there. A number of officials have fled to European countries such as the UK, Germany and the Netherlands, too, according to the Supreme People's Procuratorate.

Ministry of Public Security figures released in 2006 show more than 800 people accused of embezzling about 70 billion yuan ($10.26 billion) had fled abroad, and 500 of them were still at large. But experts say the actual number is much higher.

Huang said the death penalty may be the biggest obstacle for some countries to sign an extradition treaty with China, but it should not deter the US because it too has not abolished capital punishment.

In fact, "US Congress' prejudice against China's legal system and human rights has been hindering the progress," he said.

Take this financial crisis as a chance, China is going to enhance its economy power by putting money in its modern "Rooseveirs New Deal".

China's banking regulator said Saturday the government's target of new loans this year is not limited to 5 trillion yuan, and all funds should help keep the sustainable and rapid development of the economy.

Liu Mingkang, chairman of the China Banking Regulatory Commission, made the remarks at a panel discussion of the Boao Forum for Asia (BFA).

The government said earlier it expected Chinese banks to extend about 5 trillion yuan of new loans this year. However, new loans in the first quarter of this year already exceeded 93 percent of the figure.

The amount of new loans boomed in the first three months because a considerable number of projects passed evaluation procedures and were put into operation, said Liu.

The new loans went mainly to infrastructure construction and would not result in excessive industrial output capacity, he said.

Funds also went to projects that improve people's livelihood, and business-related sectors such as inventory and logistics, he said.

Agriculture-related loans saw a major increase of 28.3 percent,1.3 percentage points more than the average increase rate. In this sense, there was an evidence of more developed finance services in rural areas, said Liu.

In the middle-west China cities, like Chengdu and Chongqing, new skyscrapers creat new height and more and more old building are taken down to build new ones. That loan creats the new city sight, instead of improving the social security system.

Some chinese starts to think why the numbers on GDP is that important.