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Health & Fitness

International Investing - China, Part 1

The world is a big place – there are over 190 countries and 7 billion people in the world, which really boggles the mind if you sit down and think about it. In addition to being an interesting intellectual exercise, this fact can also have broad implications for your investments and your financial future. It is easy to stay focused on U.S. firms, news, and events during the day-to-day grind, but it is always important to be aware of your surroundings – especially when it comes to your investments. With that in mind, this series of articles will focus on countries and investment opportunities outside the United States that you might not usually hear about.

As always, be sure to consult a financial services professional familiar with both the potential investment and your unique financial situation before embarking on any investment program.

Chinese Banks

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China is the world’s second largest economy, and has been among the fastest growing economy in the world over the last several decades. China has been in the news lately generating headlines for several reasons – pollution, corruption crackdowns, and concerns over the slowing of the economy. There are, however, multiple opportunities for international investors to put capital to work in the Chinese economy. In this first segment on China we will we discussing Chinese banks, issues surrounding them, and some of the largest banks in the nation.

The largest Chinese banks are among the largest and most profitable banks in the world, with profits that routinely number in high tens of billions of yuan. Benefitting from the centralized structure of the Chinese government and economy, as well as concentrations in industries in need of large amounts of capital (agriculture, construction, and energy) these financial institutions have grown into global behemoths. Seeking to diversify lending and investment portfolios, many of these largest banks have sought to establish branches overseas and have done so successfully.

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Issues that continue to plague these financial institutions are the issues of bad debts, and the lack of sophisticated risk controls (compared to other international giants) due to the privileged status these institutions enjoy domestically. Last but not least, the very concentration of industries that generate the enormous profits in China have led to a high amount of concentration in terms of revenue – this puts the financial institutions at a large risk of customer default.

Some of the largest Chinese banks to watch:

Industrial & Commercial Bank of China, Ltd.
Chinese Construction Bank Corp
Agricultural Bank of China Ltd

As always, I have attached some links with more information

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