Historical Overview of Chinese Financial Sector

Prior to 1949, the financial system of China was very well developed. The earliest form of capitalism can be seen at the times of the late Ming Dynasty (17th century), when commerce was initiated in the Zhejiang-Jiangsu area and further developed during the Qing Dynasty (17th century to early 20th century). Late Qing China had a highly commercialized society with detailed regulations of guilds (merchant coalitions), where the key role was played by family traditions and customs. In Section IV below, it will be shown that modern equivalents of these mechanisms were behind the success of Hybrid Sector firms in the same areas in the 1980s and 1990s.

The development of China’s financial system from the late nineteenth century to the early twentieth century was highlighted by the emergence of Shanghai as the financial center of China and Asia. During this period, Shanghai transformed from an agricultural-based trading hub for surrounding areas into an industrialized center linked to international goods and financial markets. With thriving entrepreneurial and trading activities, various financial institutions were given life. For example, five of China’s first modern banks were founded between 1897 and 1908; and by 1936, there were 28 major foreign banks that had set up branches in Shanghai.

After the foundation of the People’s Republic of China in 1949, all of the pre-1949 capitalist companies and institutions were nationalized. Between 1950 and 1978, China’s financial system consisted of a single bank – the People’s Bank of China (PBOC), a central government owned and controlled bank under the Ministry of Finance, which served as both the central bank and a commercial bank, controlling about 93% of the total financial assets of the country and handling almost all financial transactions. With its main role to finance the physical production plans, PBOC used both a “cash-plan” and a “credit-plan” to control the cash flows in consumer markets and transfer flows from branches of the bank.

The first main structural change began in 1978 and ended in 1984. By the end of 1979, the PBOC departed the Ministry and became a separate entity, while three state-owned banks took over some of its commercial banking businesses: The Bank of China (BOC) was given the mandate to specialize in transactions related to foreign trade and investment; the People’s Construction Bank of China (PCBC), originally formed in 1954, was set up to handle transactions related to fixed investment (in manufacturing); the Agriculture Bank of China (ABC) was set up (in 1979) to deal with all banking business in rural areas; and, the PBOC was formally established as China’s central bank and a two-tier banking system was formed. Finally, the fourth state-owned commercial bank, the Industrial and Commercial Bank of China (ICBC) was formed in 1984, and took over the rest of the commercial transactions of the PBOC.

For most of the 1980s, the development of the financial system can be characterized by the fast growth of financial intermediaries outside of the “Big Four” state-owned banks mentioned above. For example, regional banks (partially owned by local governments) were formed in the Special Economic Zones in the coastal areas; in rural sectors, a network of Rural Credit Cooperatives (RCCs; similar to credit unions in the U.S.) was setup under the supervision of the ABC, while Urban Credit Cooperatives (UCCs), counterparts of the RCCs in the urban areas, were also set up. Non-bank financial intermediaries, such as the Trust and Investment Corporations (TICs; operating in selected banking services and non-banking services with restrictions on both the sources of deposits and loans made), emerged and proliferated in this period.

In 1985, the government legalized the status of foreign banks’ branches and their operations in the Zones. The financial reforms slowed down during 1988-1991 to control inflation, during which considerable (government-run) consolidation took place. For instance, many TICs were merged and were increasingly regulated by the PBOC.

In 1992, the famous “Southern Tour” by then Chinese leader Deng Xiaoping marked the beginning of another economic boom. In the financial system, this period witnessed a sharp increase in foreign direct investment (FDI), a deregulation of the banking sector characterized by the emergence of many new state/local government owned commercial banks, and the re-emergence of Shanghai as the financial center of China.

In 1994, three “policy banks” were established to take over “policy” related lending in underdeveloped areas, export and import, and rural areas, while the four largest state-owned banks further developed into regular commercial banks, with profit maximization becoming an increasingly more important goal. Along with the growth of banks and financial intermediaries, inter-bank lending (1994) and bond (1997) markets were established, and the bank debit/credit cards market expanded rapidly. During the same period, the central bank (PBOC) increasingly used interest rates and reserves to manage the liquidity of the banking sector. For example, the PBOC sets lower and upper bounds on deposits and loans, while commercial banks can decide the actual rates within the bounds. The inter-bank lending rates were converted toward a uniform system in 1996.

The most significant event for China’s financial system in the 1990s was the inception and growth of China’s stock market. Two domestic stock exchanges, the Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE), were established in 1990, and have experienced remarkable growth since then.

Following the Asian Financial Crisis in 1997, financial sector reform has focused on state-owned banks and especially the problem of nonperforming loans (NPLs). Finally, China’s entry into the WTO in December 2001 marked the beginning of a new era. Since the eventual opening of the capital account and adopting a floating exchange rate are required by the WTO, one should expect to see increasing competition from foreign financial institutions and frequent and large scale capital flows. Perhaps we can even some witness dramatic changes and intriguing events within China’s financial system shortly after December 2006 (the end of the five-year transition period after joining the WTO).

How To Use Mortgage Accelerators For Financial Planning

What is a mortgage accelerator and why should you use one? Very simply, by using a mortgage accelerator, you’re going to save a great deal of money on your mortgage interest. More importantly, there are other reasons you should consider using it, and especially in today’s economy.

For example, by using a mortgage accelerator you are reducing your risk of long-term debt. Financial worry is something that confronts many people today, unfortunately. A mortgage accelerator can greatly reduce the chance that you will suffer financial worry and stress by eliminating the financial burden of paying a mortgage for 30 years.

A mortgage accelerator will allow you to pay off your mortgage during your peak earning years. When you pay off your mortgage in your peak earning years, you don’t have that high monthly expense to worry about as you get older, and especially if your income declines, as has happened to so many middle age people in the United States.

A mortgage accelerator, if used properly, will have no adverse impact on your spending habits or your lifestyle. If you don’t have the burden of paying $2,000 or $3,000 in mortgage payments each month (a good part of which is interest) that you make to the bank, you can start using your money to build up your retirement account and have it accumulate to where it becomes wealth.

After all, how many of us work for companies that pay our 401(k) or retirement plans today? The answer is – very few. Therefore, as time goes by, your ability to accumulate money and have it grow into wealth diminishes as you get older. By using a mortgage accelerator and paying off your mortgage quickly you save thousands or hundreds of thousands of dollars in interest.

You can re-allocate those funds in a way that will allow you to build wealth for the future – to grow your retirement assets; to help you save for your children’s college education; and to look forward to the things you want to do later on in life in your retirement. By using a mortgage accelerator, you will also be relieved of financial strain should your income decline before your mortgageâÂÂs normal maturity date. So, for your familyâÂÂs financial security, using a mortgage accelerator is the best decision for virtually every homeowner with a mortgage who wants to enjoy their retirement years.

During these uncertain economic times. It’s more important than ever to make sure that your financial plan provides you and your family a secure financial future. For homeowners with a mortgage, the unforeseen risk posed by the stock market can jeopardize the future, or worse yet, put retirement out of reach completely.

Are you placing your faith in investments with doubtful results? Give yourself the assurance your future is secure with a plan that eliminates investment risk and is based on solid arithmetic. A mortgage accelerator is such a plan. The financial outcome of a mortgage accelerator is solid, and not based on market fluctuations.

Homeowners around the world have used mortgage accelerator systems for years. The mortgage magic system will help you maximize your future financial assets and provide a longer, richer retirement. Maybe you’d like a lot of advice or just have a few questions, a mortgage accelerator adviser is ready to assist you. Call our toll-free number at 866-312-3069. With this information, you can make the best decisions for your financial future.

California State Unclaimed Property and Assets

Any financial asset that has had no activity by its owner is being held by an organization. It can be can be any financial asset or sum of money that appears to have been abandoned by the owner. Property is usually considered unclaimed after three years, when it is turned over to the state of Washington. The sources of unclaimed properties are banks, retailers, credit unions, utilities, corporations, insurance companies, and governmental entities. It does not include real estate, vehicles, and most other physical property. The law also provides that utility deposits, unclaimed assets and wages resulting from business dissolutions be reported as state unclaimed property after one year of inactivity.

The State of California is holding more than $4.8 billion in Unclaimed Property belonging to 7.6 million individuals and organizations. These unclaimed funds have been turned over to the State for safekeeping by banks, businesses and other organizations as required by law. The Department of Revenue is the custodian for unclaimed property, and it administers an unclaimed property program to seek the rightful owners. The unclaimed property in California is acquired by the State through Unclaimed Property Law in California. It requires holders such as business associations, financial institutions, corporation, and insurance companies to report and deliver property to the State Controller’s Office Unclaimed Property.

California Unclaimed Property Law protects unclaimed property until it can be returned.This law gives the State an opportunity to return your money and provides citizens with a single source, the State Controller’s Office, to check for unclaimed property that may be reported by holders from around the nation. There is no time limit for filing a claim and rightful owners or their heirs can claim property reported since 1955. The state unclaimed property authority may auction the content of safe deposit boxes, however, if not claimed within five years. California State Unclaimed property program publish names of owners in newspapers, set up displays at malls and public events, work with other public officials and make databases available via the Internet. Unclaimed property officials welcome opportunities to speak to the media and other groups.

You may have heard about unclaimed treasury found from old insurance policies, over paid taxes, stocks and dividends, old checking & saving accounts and many other sources. It is currently estimated that there is over $2.3 BILLION in cash unclaimed. All you have to do is find yours and claim it.

There are also chances of unclaimed bank accounts. Bank accounts may be considered abandoned when you fail to make a deposit or withdrawal in a given year. These unclaimed accounts occur upon the death of a family member, a name change after marriage or divorce, the expiration of a mail forwarding order after a move, or as a result of a computer or clerical error. Unclaimed money may be recovered after years of inactivity, even if a passbook is lost or destroyed, but you should act promptly.

Do Your Own Business Valuation ? Part 8: Asset-Based Methods

There are 3 approaches to valuing a company – market, income and asset. This article covers the asset- based approach.

The asset-based approach breaks a company down in to its pieces and attempts to value each individual asset separately. For most physical and financial assets this is a fairly straight forward process. Third-party sources of market values and comparable sales data are available. A number of problems appear when dealing with intangible assets. Identifying every component of an intangible asset like goodwill is like peeling an onion. There are endless layers of factors that become increasing detached from reality.

For these reasons the asset-based approach is often applied to tangible assets only.  The book values of all assets that would be included in the sale of the company are adjusted to their respective market values.  

First, list the value of each asset as it is shown in your accounting records. The book value of inventory should come from a tax return, balance sheet, or trial balance. The book value of assets being depreciated should come from your depreciation schedule. Your CPA or tax preparer may keep this schedule for you. Only items of significant value should be listed individually. All other items should be valued as a group.   

Now adjust each asset using the following methods:

Inventory - Adjust inventory to an estimate or actual physical count of what is currently on hand. Inventory should be valued at your cost. Only include inventory that is saleable.  

Vehicles – Only include vehicles that are used in the business and that would be included in a sale of the company. Market values for cars and light trucks can be obtained from Kelley Blue Book at www.kbb.com. Search listings of commercial vehicles for sale on websites like TruckPaper.com.

Equipment - For large items with significant value you should attempt to estimate value by researching used equipment sales online or checking with the equipment vendor. For most other equipment a bulk estimate is often sufficient. For items that rapidly depreciate in value, like computer hardware, book value is usually a reasonable estimate. For other items a percentage of their original cost works well.  A range of 30% to 60% is common. The age and condition of the items plus the market for that type of used equipment should be considered. For example, there is typically a lot of used restaurant equipment on the market, so it generally does not have much value.

Real estate - Use recent appraisals or tax assessment data to estimate value. If no recent appraisal is available and you choose not to get a new one, there are several options. Many real estate firms offer free market assessments. You can update the values from older appraisals by adjusting them for annual changes in the average sales prices of homes in your area. This information is often available from real estate agents, chambers of commerce, or websites like City-Data.com.       

Other – List any other assets that would be included in a sale of the company and estimate their current value as best you can.

The total adjusted value of these assets is the value of your company without any goodwill.

Summary

The asset-based approach is most appropriate for companies with no intangible asset value – startups and companies with little or no earnings. The total adjusted tangible asset value is often used as the base value of a company since it excludes any and all intangible assets (goodwill). It is often used to determine the tangible asset portion of the value of a company using another method.