Beijing made a major shuffle of its top financial industry regulators over the weekend, underscoring once again why investors should think of China’s big 4 banks more as government policy lenders and not be deceived into belieiving they are real commercial banks. In a move that was rumored but finally made official on Saturday, top executives from two of the big 4 banks, Agricultural Bank of China (HKEx: 1288)(Shanghai: 601288) and China Construction Bank (HKEx: 939)(Shanghai: 601939), were named to head China’s insurance regulator and its securities regulator, respectively. (English article) The two men, Xiang Junbo and Guo Shuqing, were both chairmen of their respective banks until late last week, when they abruptly resigned just ahead of the announcement. So let’s think about this for a minute: chairmen of two of the country’s top 4 banks are now chairmen of two of the major financial regulators. In any other country, this kind of move would raise major concerns about conflicts of interest, as the big banks all deal in both insurance and securities through their various affiliates and vast webs of relationships in China’s financial world. Does this mean that if new insurance regulations are about to come out, then Agricultural Bank of China will know about them first and potentially use that information to its advantage? Or if the country decides to reform its securities policies, does that mean that China Construction Bank will be forced to more strongly enforce the new regulations than other banks because its former chairman now heads the securities regulator? The answer to all these questions is “probably yes”, and shows why the big banks are nothing more than policy tools that the government uses to train future top party and industry officials. This kind of shuffle isn’t unique to the banking industry, as the oil industry saw a similar move earlier this year (previous post) and the telecoms sector did something similar a few years back. But it does underscore why investors should be wary of these big state-run giants, and why China should seriously consider re-privatizing its big 4 banks.

Bottom line: The latest shuffle at the top of China’s big 4 banks underscores once again that these lenders are nothing more than policy instruments of Beijing and not true commercial lenders.

Related postings 相关文章:

◙ Message to Beijing: Privatize the Big 4 Banks 对中国政府说：将四大银行退市吧

◙ ICBC Discovers China’s Latest Low-Cost Export: Currency 工行将从非洲人民币结算业务中获益

◙  China’s Oil Shuffle: Not So Fast, Naysayers 石油巨头高管轮换：先别急着唱衰

It’s difficult to read too much into a simple name change, but US e-commerce leader Amazon’s (Nasdaq: AMZN) decision to rebrand its China operation as Amazon China, combined with the opening of a major new facility, appears to signal a major ramp-up in its Chinese business. If true, that could mean bad news for established players like Dangdang (NYSE: DANG), 360Buy and Alibaba’s Taobao Mall, as Amazon has far more resources than most of these Chinese companies and, unlike most of them, is quite profitable. But let’s look at the news first. Domestic media are reporting that more than 5 years after purchasing Chinese online merchant Joyo.com, Amazon has finally decided to rebrand the company as Amazon China, from its previous name of Joyo Amazon. (English article) Amazon is making the change as it opens its 10th China facility, a massive 120,000-square-meter warehouse in the city of Kunshan, near Shanghai and within easy driving distance of hundreds of millions of consumers in the affluent Yangtze River Delta area. The new facility increases Amazon’s warehouse space in China by almost 50 percent, and quadruples its space in the Yangzte River Delta area. That kind of rapid ramp-up, combined with the name change, strongly indicate the company is planning a major boost in its China operations, just as the market appears to be getting overheated with rampant competition from a big field of young start-ups like 360Buy, which wants to make a multibillion-dollar IPO to recoup some of the $1 billion-plus in investor dollars it has received to date. (previous post) Amazon’s timing also looks good with regard to Taobao Mall, one of the few profitable companies in the space, which is going through a credibility crisis after many of its smaller merchants rebelled following a steep fee hike. (previous post) All that said, look for Amazon, riding high on the popularity of its Kindle e-readers and newly launched tablet PCs, to become an increasingly hot name in the China e-commerce space over the next 2 years at the expense of existing players.

Bottom line: Amazon’s rebranding of its China business and opening of a major new facility indicate a coming ramp-up of its Chinese business, further heating up the ultra-competitive market.

Related postings 相关文章:

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

◙ Albaba Faces New Assaults From Merchants, 360Buy 阿里巴巴受到中小商户和京东商城的双重夹攻

◙  More Internet Froth in Alibaba Valuation, Dangdang Price War 阿里巴巴估值奇高凸显网络泡沫