Home Economics A new mood of optimism infects investors in China’s banks

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

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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.

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