Time to rethink, re-evaluate
Saturday, September 8, 2007
THE credit crisis arising from the US subprime mortgage woes may not have as big an impact on the markets in Asia, and China in particular, as it has on those in the US and Europe. But the problems have brought into sharp focus numerous pertinent issues weighty enough to cause financial planners around the world to rethink and re-evaluate their policies.
One of the foremost questions is the future of commercial banks.
As developments in the US and Europe show, the middleman role for commercial banks between depositors and borrowers is falling into eclipse because more and more corporations are raising capital directly from the public by issuing debt instruments and their derivatives that can be traded easily in the various capital markets.
Thanks to the highly developed and relatively transparent market for such instruments, it is possible to securitise almost anything that promises to generate a predictable and consistent stream of income.
The outbreak of the credit crisis in the US, therefore, must not be seen as a condemnation of the securitisation trend. The crisis merely shows up the problems that need to be addressed by the supervisory agencies to facilitate and ensure a more orderly development of the market which is providing an efficient channel for corporations to raise capital directly from the public, who, in turn, are willing participants in search for higher returns on their savings than bank interest rates.
Many commercial bankers long ago saw what was coming and made preparations to adapt to the changes by focusing on expanding their service-based incomes to such businesses as corporate advisory and personal wealth management. The large commercial banks, empowered by their huge capital bases, have also got into the securitisation act in a big way through their investment and private banking subsidiaries.
In Hong Kong, for instance, the big international banks are selling a widening range of financial derivative products created by their investment banking subsidiaries to their private banking clients.
To be sure, the small- to medium-sized companies which lack the clout to raise capital in the market, will continue to finance their operations with loans from commercial banks. But in a highly competitive market where interest rates are free, commercial banks are finding it increasingly difficult to make a profit because of the narrowing spread between the lending rates and cost of funds. The thinning profit margin has prompted some banks in Hong Kong, for example, to charge service fees on small deposits.
The threshold of the securitisation business is high in terms of capital and expertise. For that reason, the principal players in the market are limited to the large international banking groups that control extensive deposit collecting networks, which provide them the financial clout to underwrite their investment banking businesses.
Taking the long-term view, the Shanghai municipal government has proposed to establish a financial powerhouse, built around the Pudong Development Bank, the largest Shanghai-based joint stock commercial bank. It is hoped that such an entity will have adequate enough financial resources and business scope to compete with the international banking groups as Shanghai is making rapid progress to becoming an international financial centre.
Playing host to nearly all the major international banks in the world, Hong Kong has remained structurally way ahead of other aspiring financial centres in the region. To keep its lead, the Hong Kong monetary officials have in the past several years reformed the regulatory framework to bring it more in line with other international financial centres. The Hong Kong Monetary Authority has also been stepping up its efforts to forge closer links with mainland capital markets.
The US credit crisis is troubling, but it serves to focus people's minds on the big changes that will reshape the global financial marketplace.
False advertising
It is natural for companies to invite celebrities to promote their products in advertisements, but that does not mean they should mislead consumers by telling lies in these advertisements.
Beijing has become the first city nationwide to ban celebrities from appearing in pharmaceutical advertisements following Vice-Premier Wu Yi's speech late last month that celebrities should be banned from convincing viewers how effective a drug is in product promotions.
It is a worldwide practice for celebrities to be invited to promote products for manufacturers because their faces are familiar to the general public and likely to impress viewers. But there is a limit to what these people should say about the products they promote.
As a matter of fact, quite a number of Chinese celebrities from the entertainment circle have been involved in scandals when the products, drugs in particular, they promote are not as effective as claimed in the advertisements. Some have gone so far as to claim that a certain drug had worked wonders for them when in fact they had never used the drug.
An actor was sued by a customer when the weight-loss tea he promoted proved to be ineffective. The actor insisted he had used the tea and had lost weight, but many believed he was telling lies. He appeared to be of the same weight even after the tea promotion.
The ban is necessary given the fact that many celebrities tell lies, particularly in their promotion of drugs. It will certainly help assuage the grievances of many who feel actors should not be making big money by misleading consumers.
Of course, the morals of these celebrities is also put into question, they should certainly take responsibility for the lies they have told.
But the main question is whether the ban will work for long. Drug manufacturers will quite probably devise new advertising tactics to circumvent it.
We need well-designed rules and a supervisory mechanism to kill advertisements that tell untruths before they are aired or published. If such advertisements do appear, we need to have workable rules to punish both the celebrities who deliberately mislead consumers, and watchdogs that fail to stop them from being aired or published.
A ban as a temporary measure does work, but a sound supervisory mechanism will be more effective to plug the loopholes.
Contest with a twist
At a time when various award-giving events have made the public somewhat uninterested or insensitive to the prize winners, singling out bad examples certainly sounds fresh and new and could have a much better social effect.
This may be one of the reasons why the organisers of Green China Annual Figure awards promise that they will also make public negative nominees, or those who have damaged the environment, along with the positive nominees competing for this year's eight prizes.
A government-initiated award in its third year, the Green China Annual Figure award is designed to recognise those who have made contributions to environment protection.
The growing public interest and the zeal from online voters bear witness to the rising popularity of the award.
It also mirrors intensified awareness of environmental conservation in a country where even its top leaders have confessed that the environment issue is very serious.
China Daily/ANN
One of the foremost questions is the future of commercial banks.
As developments in the US and Europe show, the middleman role for commercial banks between depositors and borrowers is falling into eclipse because more and more corporations are raising capital directly from the public by issuing debt instruments and their derivatives that can be traded easily in the various capital markets.
Thanks to the highly developed and relatively transparent market for such instruments, it is possible to securitise almost anything that promises to generate a predictable and consistent stream of income.
The outbreak of the credit crisis in the US, therefore, must not be seen as a condemnation of the securitisation trend. The crisis merely shows up the problems that need to be addressed by the supervisory agencies to facilitate and ensure a more orderly development of the market which is providing an efficient channel for corporations to raise capital directly from the public, who, in turn, are willing participants in search for higher returns on their savings than bank interest rates.
Many commercial bankers long ago saw what was coming and made preparations to adapt to the changes by focusing on expanding their service-based incomes to such businesses as corporate advisory and personal wealth management. The large commercial banks, empowered by their huge capital bases, have also got into the securitisation act in a big way through their investment and private banking subsidiaries.
In Hong Kong, for instance, the big international banks are selling a widening range of financial derivative products created by their investment banking subsidiaries to their private banking clients.
To be sure, the small- to medium-sized companies which lack the clout to raise capital in the market, will continue to finance their operations with loans from commercial banks. But in a highly competitive market where interest rates are free, commercial banks are finding it increasingly difficult to make a profit because of the narrowing spread between the lending rates and cost of funds. The thinning profit margin has prompted some banks in Hong Kong, for example, to charge service fees on small deposits.
The threshold of the securitisation business is high in terms of capital and expertise. For that reason, the principal players in the market are limited to the large international banking groups that control extensive deposit collecting networks, which provide them the financial clout to underwrite their investment banking businesses.
Taking the long-term view, the Shanghai municipal government has proposed to establish a financial powerhouse, built around the Pudong Development Bank, the largest Shanghai-based joint stock commercial bank. It is hoped that such an entity will have adequate enough financial resources and business scope to compete with the international banking groups as Shanghai is making rapid progress to becoming an international financial centre.
Playing host to nearly all the major international banks in the world, Hong Kong has remained structurally way ahead of other aspiring financial centres in the region. To keep its lead, the Hong Kong monetary officials have in the past several years reformed the regulatory framework to bring it more in line with other international financial centres. The Hong Kong Monetary Authority has also been stepping up its efforts to forge closer links with mainland capital markets.
The US credit crisis is troubling, but it serves to focus people's minds on the big changes that will reshape the global financial marketplace.
False advertising
It is natural for companies to invite celebrities to promote their products in advertisements, but that does not mean they should mislead consumers by telling lies in these advertisements.
Beijing has become the first city nationwide to ban celebrities from appearing in pharmaceutical advertisements following Vice-Premier Wu Yi's speech late last month that celebrities should be banned from convincing viewers how effective a drug is in product promotions.
It is a worldwide practice for celebrities to be invited to promote products for manufacturers because their faces are familiar to the general public and likely to impress viewers. But there is a limit to what these people should say about the products they promote.
As a matter of fact, quite a number of Chinese celebrities from the entertainment circle have been involved in scandals when the products, drugs in particular, they promote are not as effective as claimed in the advertisements. Some have gone so far as to claim that a certain drug had worked wonders for them when in fact they had never used the drug.
An actor was sued by a customer when the weight-loss tea he promoted proved to be ineffective. The actor insisted he had used the tea and had lost weight, but many believed he was telling lies. He appeared to be of the same weight even after the tea promotion.
The ban is necessary given the fact that many celebrities tell lies, particularly in their promotion of drugs. It will certainly help assuage the grievances of many who feel actors should not be making big money by misleading consumers.
Of course, the morals of these celebrities is also put into question, they should certainly take responsibility for the lies they have told.
But the main question is whether the ban will work for long. Drug manufacturers will quite probably devise new advertising tactics to circumvent it.
We need well-designed rules and a supervisory mechanism to kill advertisements that tell untruths before they are aired or published. If such advertisements do appear, we need to have workable rules to punish both the celebrities who deliberately mislead consumers, and watchdogs that fail to stop them from being aired or published.
A ban as a temporary measure does work, but a sound supervisory mechanism will be more effective to plug the loopholes.
Contest with a twist
At a time when various award-giving events have made the public somewhat uninterested or insensitive to the prize winners, singling out bad examples certainly sounds fresh and new and could have a much better social effect.
This may be one of the reasons why the organisers of Green China Annual Figure awards promise that they will also make public negative nominees, or those who have damaged the environment, along with the positive nominees competing for this year's eight prizes.
A government-initiated award in its third year, the Green China Annual Figure award is designed to recognise those who have made contributions to environment protection.
The growing public interest and the zeal from online voters bear witness to the rising popularity of the award.
It also mirrors intensified awareness of environmental conservation in a country where even its top leaders have confessed that the environment issue is very serious.
China Daily/ANN
Business Besides Oil
