Sucking Away Local Money
The local units of major Chinese banks have been rapidly attracting a huge amount of deposits from domestic enterprises and financial firms.
According to Korea’s top three credit rating agencies on November 28, the Chinese banks succeeded in opening new bank accounts worth at least 1.2 trillion won for four weeks in November alone in the way of offering higher interest rates.
Banking analysts said that the money from the deposits has been used to make up for the fund shortfalls of the Chinese banks’ head offices that have suffered from difficulties in attracting their own capital in China.
The four major Chinese banks doing business in Korea are Industrial and Commercial Bank of China, China Construction Bank, Bank of China, and Bank of Communications.
The main depositors were local securities houses that used the deposit accounts for issuing asset-backed commercial papers (CPs), which were sold to domestic companies including financial firms.
In this way, a 4.95 billion yuan (about 860 billion won, US$812 million) and US$360 million (380 billion won) flowed out to China as of this November, said the local rating agencies.