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ID: 089552

Foreign exchange exposure of Chinese banks / Wong, Tak-Chuen; Wong, Jim; Leung, Phyllis

Wong, Tak-Chuen	Journal Article
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2009.

Summary/Abstract

Using the capital market approach and the equity price data of 14 listed Chinese banks, this empirical study finds that there is a positive relationship between bank size and foreign exchange exposure. This relationship may reflect the larger foreign exchange operations and trading positions of larger Chinese banks and their significant indirect foreign exchange exposure arising from impacts of the renminbi exchange rate movements on their customers. Empirical evidence also suggests that the average foreign exchange exposures of state-owned and joint-stock commercial banks in China are higher than those of banks in Hong Kong, notwithstanding their limited participation in international banking businesses compared with their Hong Kong counterparts. It is also found that negative foreign exchange exposure is prevalent for larger Chinese banks, suggesting that an appreciation of the renminbi tends to reduce their equity value. It is therefore likely that the banking sector's performance will be hampered. Together with the fact that decreases in equity values generally imply a higher default risk, the effects of different scenarios of renminbi appreciation on the default risk of Chinese banks should therefore be closely monitored.

Key Words

China ; Banking ; Foreign Exchange Policy ; Foreign Exchange Risk

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ID: 073537

Foreign exchange reserves policies of India and other Asian cou: problems and opportunities / Agarwala, Ramgopal

Agarwala, Ramgopal	Journal Article
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Publication

2006.

Summary/Abstract

A few Asian states currently hold the world's largest foreign exchange reserves but India for one, has not made a productive use of its surplus balance, which carries a high opportunity cost. Setting up Asian economic and financial mechanisms (such as a Reserve Bank of Asia) in order to plow back this bounty into infrastructure build-up could help rapidly overcome the continent (and the world's) poverty according to Ramgopal Agarwala.

Key Words

Economic Development ; India ; Asia ; Foreign Exchange Policy

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