A new mood of optimism infects investors in China's banks

GUO SHUQING, China's new banking regulator, knows the enormity of his task. China's banking system, he observed last month, is worth more than $33trn. So it is bigger than any other country's, and even than Europe's as a whole. And he is well aware of the pitfalls left by a decade of breakneck lending growth. But if Mr Guo is nervous, he is hiding it. 'All problems and contradictions will be resolved,' he says.Of course, a Chinese official can be expected to express confidence about Chinese banks. More surprising is that a small but growing number of analysts and investors seem to concur. Chinese bank shares are up by a quarter since early last year. One investment bank, Morgan Stanley, has declared that China's lenders are 'in a sweet spot'. Another, Goldman Sachs, has upgraded China to 'overweight''that is, recommending that clients buy Chinese shares'and is especially positive about the banks. Shanghai Financial News, a local newspaper, described the new mood around these giant institutions as the 'return of the king'. The question is whether it will be a long, stable reign or a short-lived, turbulent one.The...Continue reading
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