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Article: The foreign exchange exposure of Chinese banks

TitleThe foreign exchange exposure of Chinese banks
Authors
KeywordsForeign exchange policy
Foreign exchange risk
Banking
China
Issue Date2009
PublisherElsevier BV
Citation
China Economic Review, 2009, v. 20 n. 2, p. 174-182 How to Cite?
AbstractUsing 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.
Persistent Identifierhttp://hdl.handle.net/10722/60167
ISSN
2015 Impact Factor: 1.116
2015 SCImago Journal Rankings: 0.997
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorWong, TCen_HK
dc.contributor.authorWong, Jen_HK
dc.contributor.authorLeung, Pen_HK
dc.date.accessioned2010-05-31T04:05:08Z-
dc.date.available2010-05-31T04:05:08Z-
dc.date.issued2009en_HK
dc.identifier.citationChina Economic Review, 2009, v. 20 n. 2, p. 174-182en_HK
dc.identifier.issn1043-951X-
dc.identifier.urihttp://hdl.handle.net/10722/60167-
dc.description.abstractUsing 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.-
dc.languageengen_HK
dc.publisherElsevier BV-
dc.relation.ispartofChina Economic Reviewen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsChina Economic Review. Copyright © Elsevier BV.-
dc.subjectForeign exchange policy-
dc.subjectForeign exchange risk-
dc.subjectBanking-
dc.subjectChina-
dc.titleThe foreign exchange exposure of Chinese banksen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1043-951X&volume=20&issue=2&spage=174&epage=182&date=2009&atitle=The+foreign+exchange+exposure+of+Chinese+banks-
dc.identifier.emailWong, TC: Etcwong@hkma.gov.hk-
dc.identifier.emailWong, J: Jim_HY_Wong@hkma.gov.hk-
dc.identifier.emailLeung, P: Plyleung@hkma.gov.hk-
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.chieco.2009.03.003-
dc.identifier.scopuseid_2-s2.0-67349193010-
dc.identifier.hkuros167367en_HK
dc.identifier.volume20-
dc.identifier.issue2-
dc.identifier.spage174-
dc.identifier.epage182-
dc.identifier.isiWOS:000267184900006-
dc.identifier.citeulike5245147-

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