ABC Deals with Poor Economic Growth

Agricultural_Bank_of_ChinaAgricultural Bank of China Ltd. has set aside additional money to cover future bad loans, amid the country’s economic  slowdown. The lender has more retail customers than the entire population of the Euro Zone, according to Wn.com. A recent Hong King exchange filing shows the bank increased provisions to 15.6 billion yuan ($2.5 billion), a boost of 56 percent from where it was one year ago.

Mao Zedong set up Agricultural Bank of China in 1951. The government-controlled lender is dealing with the quick rise in bad loans in the countryside. Projections for economic growth in China are low—at the weakest pace since 1990.

Jack Worthington is Managing Partner of Arundel & Co, a private equity investing banking boutique focused on facilitating private equity investment on a global basis. He explains, “The property industry—construction, sales, white goods, etc.—represents about 15-30% of China’s GDP. So with residential property prices and homeowner equity in a tailspin, it’s not unexpected that China’s banks are in trouble. One key issue to watch is how this plays out politically as the economic downturn unfolds, since the countryside seems to be experiencing a more significant downturn, and a growing countryside / coastal divide in China can fuel social instability.”

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