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Print Edition> Business
UPDATED: January 15, 2007 No.3 JAN. 18, 2007

For China Everbright Bank (CEB), the "What about us?" must have finally gotten too loud to ignore.

CEB, known as a second-tier bank, is ready to be listed to take a slice of the blooming stock market in China.

While CEB was the first state-held commercial bank with foreign investment, recently it has been performing poorly. At the end of 2003, its capital adequacy ratio was only 4.65 percent, 3.35 percent less than the required ratio for listing. Wang Mingquan, CEB President, added other problems plaguing the bank include historical capital problems and newly added non-performing loans. CEB's website noted its net profit from January to September in 2006 was 2.18 billion yuan, one fourteenth of that of Bank of China.

But recently, Central Huijin Investment Co. Ltd., the central bank's investment arm, will inject 20 billion yuan into the bank to shore up its competitiveness, allowing it to list.

The Wall Street Journal cited an unidentified source that CEB has chosen Morgan Stanley and China International Capital Co. as advisers for its planned Hong Kong listing.

Meet the New Benchmark Rate

Banks operating in China can lend and borrow money from each other at a rate that fluctuates with the market.

This average of these rates will now be called the Shanghai Inter-bank Offer Rate, or Shibor for short, as opposed to the world benchmark rate Libor (London Inter-bank Offer Rate). The central bank has chosen to cultivate Shibor as a benchmark rate in China instead of the widely suspected one-year interest rate.

Before, the inter-bank offer rate was fixed by the central bank and was not in line with market change. But after three months of a trial run, Shibor has been working soundly and has won respect from banks.

According to the statement by the central bank, the inter-bank offer rates will be determined on the basis of daily quotes for 16 maturities of inter-bank rates, ranging from overnight to one year, provided by 16 commercial banks that are major dealers in the money market.

The statement did not name the 16 banks, but according to the central bank circular in September, they include three foreign banks: the Shanghai branches of Deutsche Bank, HSBC and Standard Chartered Bank.

Experts believe that for the financial market, market-oriented benchmark Shibor will provide a way for the central bank to carry out macroeconomic control measures.

Sorry Pals, More Trade Surplus Last Year

The United States has been wrangling with China over the Chinese trade surplus and has urged China to appreciate its currency. But even with the renminbi floating and increasing in value, making exports more expensive to the United States, China still logged a record high trade surplus of $177.47 billion, up 74.16 percent from 2005 (see graph).

Despite the palpable tension resulting at major Chinese export destinations, Bo Xilai, Minister of Commerce, stated early last year that 58 percent of exports and 50.7 percent of the trade surplus in 2005 was caused by foreign companies in China. So at least foreign companies are benefiting from the trade surplus, even if foreign countries aren't.

As Li Lingmin, Vice President of the China National Textiles Import and Export Co., said to Xinhua News Agency, "The international market needs Chinese products, many of which are irreplaceable. Even though we float the renminbi and reduce the export tax rebate, those don't seem to help much."

Li pointed out the key to balancing trade is for foreign countries to lift barriers and export more.

So maybe one surplus solution is more "Made in America" products for China's increasing middle class.

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