The financial and prudential performance of Chinese banks and Fintech lenders in the era of digitalization

The years 2013 to 2019 marked an explosion in Fintech in China. We analyze the financial and prudential performance of 40 exchange-traded banks and 25 listed Fintech lenders in China during this watershed period. Among other things, traditional banks experienced rising operating costs, declining profit margins and softening loan quality. Consistent with a process of adaptation, traditional bank performance stabilized in the latter part of the study period (2018-19) after an initial period of decline. Study findings also highlight rising business and regulatory costs for Fintech providers over the course of the study frame. A marked deterioration in online lenders’ Special Mention and Non-Performing Loan (SML & NPL) positions arose during the period. Within the traditional bank group, smaller entities with fewer growth options and greater foreign ownership fared worst in prudential terms. Traditional banks’ financial and prudential performance also declines with time since IPO. Relative to joint stock commercial, city and rural banks, state-owned lenders registered more resilient performance, especially in relation to asset quality. In a final area, we construct a categorical Fintech proficiency variable for China's established banks. Our preliminary evidence suggests such proficiencies help stabilize SML and NPL rates and support financial returns. Overall, we offer major contribution to the banking literature by analyzing the financial and prudential performance of both incumbent and emerging lenders in one of the world’s most dynamic Fintech settings.

A Corpus-based Study of the Discursive Construction of Corporate Identities by Chinese and American Banks

By taking the perspective of Social Constructivism and the Discourse-Historical Approach, and using the corpus linguistic tool Wmatrix, this study compares the discursive strategies adopted by Chinese and American banks in their construction of corporate identities. The research underlines the shared and unique features presented in prominent themes, communication strategies and lexical patterns. It is found that Chinese banks prefer to emphasise their historical development, industrial ranking and organisational structure to positively construct their identity as industry leaders, adopting a corporate ability strategy through the frequent usage of numbers and superlative adjectives. However, American banks tend to stress care for their employees, communities and environment. They prefer to use a corporate responsibility strategy to build their identity as social contributors through the frequent usage of performative verbs to exhibit specific corporate activities. This study may have practical implications for Chinese companies wishing to improve their international communication capability and may offer educational implications for Business English teaching.

OUTWARD FOREIGN DIRECT INVESTMENT OF CHINA’S BANKING SECTOR: DETERMINANTS AND MOTIVATIONS

The outward foreign direct investment (OFDI) is vital for the sustainable development of China’s banking sector. This paper examines the location determinants of OFDI by China’s banks during 2003–2015 with a set of negative binomial panel regression models. We show that the OFDI for China’s banking sector generally exhibits market-seeking, resource-seeking and efficiency-seeking motivations. The efficiency-seeking motivation is mostly through the incentive to avert credit risk. The OFDI also tends to flow to economically stable countries. Our results indicate that the Chinese banks’ investment decisions are mainly in line with fundamental theories and are robust for different samples and periods.

The Vanishing Interest Income of Chinese Banks

Chinese banks likely have more nonperforming loans (NPLs) than officially reported. Banks’ NPLs often deviate from Benford's law. As hidden NPLs earn no interest income, loan quality problems may erode the gross interest income of banks. Using stochastic frontier analysis, we estimate the interest income of a hypothetical profit-maximizing Chinese bank with no credit quality problems. Taking the deviation of actual interest income from the calculated efficient income, we then attempt to reveal the amount of hidden NPLs in Chinese banks. Our results uncover a substantial weakening in the quality of Chinese bank loan portfolios in 2016.

Wege aus der Covid-19-Krise: Chinesische Banken und die Hoffnung auf globales Wirtschaftswachstum

In crisis times a stable financial system is the basis to stimulate economic growth. In the bank-centered Chinese financial system mainly banks provide additional capital to the economy. According to the International Monetary Fund, the Chinese banking system represents one of the key weak spots of global financial stability. Do Chinese banks mitigate the negative consequences of the Covid-19 crisis or do they increase the risks? Based on the strengths and weaknesses of the Chinese banking system, I discuss the relevance of China for global economic growth. In summary, Chinese banks secure China’s short-term growth and lead the global economy back on the growth track. In the long run, the stability of the financial system depends on China’s ability to shape a sustainable financial system based on even more extensive reforms.

CHINESE INVESTMENT IN CENTRAL EASTERN EUROPE AND THE WESTERN BALKAN

As part of the “Belt and Road Initiative”, China has established a platform for cooperation in the field of investment with 11 European Union countries in the region of Central and Eastern Europe and 5 countries in the Western Balkan (CEEWB-16). In addition to infrastructure projects, China has invested in this region in the form of foreign direct investments (FDI). The aim of this paper is to estimate the importance of Chinese investments for 16 countries in the CEEWB-16 region. Analyzing the placement of funds, it can be concluded that FDI are placed primarily in the countries of the region that are members of the EU, while investments in infrastructure projects are mainly directed to the countries of the Western Balkans, primarily in the transport sector. Infrastructure projects are financed by the governments of the countries borrowing from state-owned Chinese banks, and these loans have the character of public loans, but the conditions of borrowing also have commercial characteristics. In addition, the contractors of infrastructure projects are mainly Chinese companies, which largely employ their workers and import materials from China, so that the positive effect on the debtor's country are smaller. However, as the countries of the Western Balkans have limited access to European funds and a great need to invest in infrastructure, they see these investment projects as a development opportunity.

Convergence or Disparity? A Cross-Country Analysis of Corporate Social Responsibility Reporting for Banking Industry in Nordic Countries and China

This research investigates the corporate social responsibility (CSR) reporting for banking industry in Nordic countries and China, and compares the convergence and disparity of disclosed CSR information across these two regimes. The study encompasses a sample of eight largest commercial banks by total assets in Nordic countries and China over a 5-year period of 2013–2017. We employ a disclosure index approach to assess the contents of CSR reporting based on eight categories and a total of 60 CSR indicators. The results indicate that Nordic banks have a higher overall disclosure level of CSR information than Chinese banks, and significantly ahead of their counterparts with respect to the international commitment, and a wider coverage of addressing stakeholders’ needs. In contrast, CSR reporting in Chinese banks put greater emphasis on national public policy and philanthropic activities. Nevertheless, all sample countries share a convergence on underlining the importance of complying with applicable laws and regulations. The study findings assert that the convergence and disparity of CSR reporting across countries is relevant to pre-existing socio-political institutions the firms can rely on. This research probes into an unexplored research territory by comparing the CSR reporting between banks from a so-called Nordic business-society model and a Confucian-tradition model. Hence, it entails some important policy prescriptions for the concerned administrators and corporate practitioners in the sample countries.