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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 103

China Business Intelligence No. 103

Samsung Economic Research Institute Beijing Office

Jan. 29, 2009

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Highlights:

I. Economy

According to China's State Administration of Foreign Exchange (SAFE), foreign capital has been flowing out of the country. China's foreign currency reserve decreased $15.6 billion from the end of September 2008 (US$1.91 trillion) to $1.89 trillion at the end of October. The global financial crisis has hampered liquidity around the world causing foreign capital to move out of emerging markets and seriously disrupting the financial administration of numerous countries. The sluggish international market and climbing labor costs have led export-driven foreign companies to suspend their businesses in China.

II. Industry

An increasing number of China's financial institutions are making forays into the overseas markets but have face mixed results in their attempts to gain more global clout. Despite their comparative advantage in capital resources, Chinese banks still have negligible influence in the international financial community due to a shortage of management expertise. Amid the deepening of the global financial crisis, the price of the world's major financial assets is falling, leading to a decline in investment risk. As Chinese financial institutions actively pursue globalization, they have inevitably been drawn into fiercer competition with the world's major international financial institutions.

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