US China Business Development Associates


China Economic Watch: Credit...

China Economic Watch: Credit Derivatives for Hedging, Pre-Movie Ad Revenue, Aviation Fuel Surcharge Hiked, OTC Drug Market

The China Banking Regulatory Commission has proposed allowing banks to use credit derivatives to hedge risk, the Wall Street Journal reported. If implemented, the new rules would allow China's banks to adopt hedging practices that are standard across the US and Europe. The unnamed source said that the CBRC proposal could allow banks to offset their credit derivative positions against assets. Yet many within the CBRC remain cautious, and banks will likely be required to obtain approval for each deal. Last November Chinese banks launched a version of credit default swaps, another risk mitigation product, but liquidity in the market has since dried up.