China’s banks are “misunderstood”

Worries about China’s slowing economy and property overhang leads many to think that China’s banks are due for the same kind of problems that banks in the West are currently facing.

But at least one investor disagrees. Gustav Rhenman, portfolio manager of East Capital, a Swedish private and public equity manager that invests in China and Eastern Europe, said that China’s banks are “misunderstood”, especially by Western investors.

This is especially the case in terms of the quality of their loan books. According to Rhenman, China Construction Bank’s loans to local government financing vehicles the politically sensitive LGFV asset class that worries most other observers only...