Regular readers of this Blog will know that I have an ongoing concern about the media, but the concern tends to be rather general because I have to acknowledge the fact that there are some excellent, responsible well-informed members of the media out there. Others hide their actual talent behind a disappointing desire to try and belittle their “victims” – perhaps hoping to provoke some sort of response to provide fodder for future columns. This, it seems, is the style favoured by the SCMP’s Jake van der Kamp. Witness last week’s attempt to ridicule the HSBC Group CEO, Stuart Gulliver, and to a lesser extent Douglas Flint the Chairman.
A point of disclosure, both Stuart and Douglas are good friends and former colleagues, so I don't deny I rather bridled at an attack on them personally, but I am writing neither in their defence nor at their request. In fact I suspect they will more than likely be embarrassed when they find out I have written anything at all. But this is not about Stuart or Douglas anyway – despite the fact that I am disappointed in Mr. van der Kamp’s cheap shots, but more about that columnist’s general remarks in the opinion piece he wrote. Particularly, for example, when he comments on the merits or otherwise of a video he says was aired at the beginning of the HSBC AGM. A video he admits he never saw because he knew "artistic expression reigned". Clever man our columnist, commenting on things he has not seen. Just the sort of uninformed opinion that is so irritating.
After such an opening I would, perhaps rather charitably on reflection, have then expected Mr. van der Kamp's opinion piece to focus on the two issues he raised - the convertibility of the RMB and Shadow Banking. However, he rather glossed over both rather condescendingly. What a pity he appeared not to have read the double spread article in his own newspaper on May 24, just 4 days earlier, headed "Setting the stage for a convertible currency". An article in which SCMP journalist Victoria Ruan commented on Beijing's efforts to make the yuan a convertible currency "for use in international trade and investment ..." This following on from a State Council announcement that yuan convertibility would be pushed forward this year. The article appeared to me to be balanced - pointing out the pitfalls as well as the benefits, and quoting a variety of sources. None of who seem to have been ridiculed by Mr. van der Kamp. I wonder why?
The commentary in Mr. van der Kamp's opinion piece then seemed to push hard the fact that China does things to suit its own purpose. Is there a country that doesn't? And asks the rhetorical question as to whether or not China is ready for internationalisation. The short answer of course, with a move as dramatic as this would be, is that markets will typically overreact and I do believe that China will get a shock. But I would not dismiss out of hand the fact that they have the intention to do it.
Oh yes; and then there's shadow banking. Of course if you want to get really picky, shadow banking comes in many forms, and at least one learned financial regulatory expert has said that regulated banking organizations are the largest shadow banks. Of course, in the context of Stuart Gulliver's remarks on the subject, we all knew he was referring to that unregulated area of banking in China, which is lending money into the market place that regulated banks won't fund. Mr. van der Kamp seemed to imply that it was a major problem for China, but didn't bother to tell us why. I think he's better than that - as some of his opinion pieces display, but this was just an out and out attack for the point of scoring points in a limited space.
In writing the opinion piece, I wonder how many regulators or people in China he spoke to, who have a better grasp of the issue, before making his "judgement". It's a bit like commenting on a film or video you haven't seen and providing a rating.
Well I have spoken to Regulators on the subject in China, and bankers, and practitioners. People who are highly intelligent and plugged in to the system. Is it a worry? Yes it is but is it being ignored and left untouched - no, it's not. This type of "banking" has gone on for centuries, and yes, not always successfully. I know banks that dabbled in it on the fringes not so long ago. They would lend to people they would trust, who would themselves then on lend to borrowers the Bank wouldn't lend to. The point being that the Bank's immediate customer knew intimately who they were dealing with and they took the risks. In China's shadow banking community non-bank funds are being lent to the shadow bankers who then on lend it at their risk to people who could not otherwise borrow the money for their business needs. So the shadow bankers are helping to keep people employed and the small business community operating. Is it ideal? No, of course it's not. Should it be regulated? Most definitely a resounding yes, but if it stifles small business, beware how much regulation you impose.
In the overall scheme of things if I was asked if it was a big risk – I would have to say that in my opinion, keeping everything in perspective, it is not.
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