Most investors assume that the world’s four largest banks are British or American concerns like JP Morgan Chase, HSBC, Bank of America, and Barclays. This may be true from an operating revenue level or even amount of profits realized every year, but from a strictly speaking banking assets figure (the best measurement of the size of a bank), the four largest banks in the world are actually all Chinese (though one of them is part owned by HSBC).
In fact per the most current ranking recently released by S&P Global Market Intelligence, these four largest banks in the world by assets are the Industrial and Commercial Bank of China with its eye watering $3.47 trillion in total assets, China Construction Bank, Agricultural Bank of China, and Bank of China. Between the second, third, and fourth largest banks, the lenders boast of assets ranging from $3.02 trillion down to $2.60 trillion. This compares quite strongly versus both JP Morgan Chase at $2.49 trillion and Britain’s powerhouse HSBC with $2.37 trillion in assets.
This has become increasingly more important to realize as the United States and its allies, terrified by and upset with North Korea and its latest hydrogen bomb nuclear test this weekend, look at some of the last Chinese entities which they still have not slapped sanctions on— the major Chinese banks.
The entire world banking system is potentially on the chopping block now. Gold is the only lifeline which is historically proven that you can rely on to safeguard your investment and retirement portfolios. This is why you need to know what gold goes in an IRA nowadays. Gold offers insurance and protection during market turbulence. Get some now while it is still relatively cheaply priced by learning how to invest in gold.
The List of Entities Left to Sanction in China Grows Thin
After three or four different rounds of ineffective sanctions, the United States and United Nations find themselves with few entities and organizations left to penalize in a desperate and so far completely fruitless effort to stop North Korea from finishing up its nuclear and ICBM weapons programs and threatening to nuclear attack the United States, Japan, and South Korea. This is an increasingly serious problem as it opens the door still wider for a military action against the North with no practical or effective other alternatives left to change their stubborn destructive course.
While the United States ponders what else it can throw at North Korea and its greatest ally China, the chorus of analysts in favor of sanctioning the biggest Chinese banks has grown increasingly louder as the only effective and non-military means of getting China to put a stop to the North’s insolence and defiance of the international community of nations. You should realize that this is not necessarily a new idea to target the largest lenders of the second largest economy in the world.
It also does represent a meaningful bite on organizations which are actively helping the North to evade sanctions, such as the Bank of China, and not only a vindictive way of punishing China for not cooperating with the global community. Donald Trump is apparently mulling over such an action too. Consider his weekend tweet on the subject below:
China is the Key to Any North Korean Compliance With World Demands
North Korea effectively crossed all the red lines this weekend by performing their sixth nuclear test. The difference between this one and the prior five tests was that this one was a highly potent hydrogen bomb that it successfully tested for the first time ever. China is the world’s best and last hope to stop the North Koreans from taking the world to the brink of war in the Korean Peninsula and Pacific.
This is because the Middle Kingdom represents by far and away the largest trading partner with Pyongyang. They make up 85 percent of the North’s trade and therefore maintain a significant amount of leverage over North Korea. Because of this fact, the United States’ Treasury Department added still more Chinese operations to the U.S. Sanctions list in August. Treasury Secretary Steve Mnuchin promised that Treasury:
“will continue to increase pressure on North Korea by isolating them from the American financial system.”
This explains how and why Mnuchin was supposedly putting together an even harsher package of sanctions on China over this past weekend. Speculation is rampant that one or more of the big four Chinese banks will soon be appearing on this list. It represents more than just a threat to the Chinese banking system since each of these four state owned Chinese behemoths have boosted their branches and presence throughout the United States over the last few years. Today their banking operations stateside now include everything from financing trading activities, to issuing bonds, to making loans.
China’s Banking Sector Becomes the Largest in the World
In fact the Chinese banking sector has grown so massive that it recently surpassed the Euro Zone as the biggest global banking system this past year. It’s total assets have risen to $33 trillion, per the Financial Times analysis. This matters more than simply pride of first place.
The entire Chinese financial system is constantly under the microscope as the banks there control over 90 percent of all assets in the second largest economy on earth, per Reuters. This is why sanctioning the biggest Chinese players would lead to “international economy and market” wide implications, per Director for Asia Scott Seaman of the geopolitical consultancy outfit Eurasia Group:
“The U.S. Treasury Department has often been hesitant to expand the secondary sanction regime to include, for example, restrictions on Chinese SOEs (state-owned enterprises) and Chinese large banks in part because the Chinese government will react very negatively, but also it will have an impact on international economy and markets. But we do expect the U.S. to come up with additional restrictions on things that will probably make Beijing upset.”
Yet no one is quite clear on what these other restrictions might be besides the big four Chinese banks. It will be interesting to see how the United States manages to apply sufficient pressure on China to force them to reign in the North Koreans short of squeezing the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China.
The Uncertain Fate of These Now Global Giant Banks Argues for You to Acquire Gold
Besides the fact that these banks themselves have become significant international players and represent the dominant players in China’s economic growth engine and underlying economic performance, they are also connected to the major Western banks in many ways. Apart from the fact that all of these major banks own each other’s credit default swaps (which gives them an unknown amount of exposure to each other’s credit risks and balance sheets), several of the major international Western banks are heavily invested in these Chinese banking giants.
HSBC and Bank of America own holdings in China Construction Bank, Goldman Sachs owns more than a five percent stake in Industrial and Commercial Bank of China, Bank of New York Mellon owns nearly 40 percent of Bank of China’s overseas preferred shares trading in New York City, and the Qatar Investment Authority and Kuwait Investment Authority each own major stakes in the Agricultural Bank of China. Major sovereign wealth funds and international banks are all heavily tied to the future success of these collective four banks.
The possibilities of one or all of them suffering severely from major United States’ led sanctions can no longer be ignored thanks to the ongoing titanic diplomatic struggle over North Korea. These are all considerations you can add to your five reasons not to sell your gold now. Gold makes sense in an IRA. This is why you need to get serious about adding gold to your retirement accounts. Start thinking about how to win over your financial adviser on gold in your portfolio.