‘Bank of China has passed its golden era’

Shares of Industrial and Commercial Bank of China (ICBC) and three other giants, China Construction Bank, Agricultural Bank of China and Bank of China, fell an average of 12% last month on the Hong Kong stock exchange.

The downward trend started in the second half of June, when interest rates in the money market here increased to a record because the Central Bank of China (PBOC) hesitated to solve banks’ thirst for cash.

Chinese banks are at risk of reduced profits and default.

Policymakers are concerned that heavy borrowers will default when economic growth slows, according to Eswar Prasad, an economist at Cornell University (USA).

Therefore, from the beginning of June, PBOC began cutting money supply in the interbank market, where banks lend to each other and even to black credit institutions.

Overnight lending interest rates in China have decreased slightly after PBOC announced a selective injection of money into the system.

According to Charlene Chu, an analyst at Fitch, the decision to let interbank interest rates rise will cause banks to restrict credit to individuals and businesses, because they are also struggling to pay customers.

“The golden era of banking is over,” said Mike Werner, an analyst at Sanford C. Bernstein Hong Kong.

Banks’ profits will be affected when new loans, which should have been used to invest in building factories, bridges and roads, are instead used to repay old debts.

The above concerns have caused Chinese investors to turn away from banking stocks.

Henry Cai – Director of Corporate Finance at Deutsche Bank Asia, said that the damage to the Chinese banking system will have an even greater impact on the entire economy, because the profits of the largest banking group account for nearly