Contact: Ms. Joy Tsang, +86-21-6113-5999 or +852-9486-4364, joy.tsang@xfmedia.cn; or Mr. Scott Zhang, +86-21-6113- 5996,scott.zhang@xinhuafinance.com

SHANGHAI, China, Sept. 19 /Xinhua-PRNewswire/ -- Xinhua Finance Limited ("XFL", TSE Mothers: 9399; OTC: XHFNY), China's premier financial information provider, analyzed and commented upon the impact on China's Banking Industry of the financial crisis on Wall Street. The full commentary is as follows:

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When Lehman Brothers, the fourth largest American investment bank, filed for bankruptcy, Merrill Lynch was acquired by Bank of America, and the U.S Federal Reserve made a USD 85 billion bridge loan to AIG, the world was stunned by the unfolding crisis. This credit crunch, which began with real estate markets, has emerged as a full-blown financial crisis threatening the global credit markets. There is widespread concern, and the U.S. and other economic entities are facing an unavoidable economic slowdown in the foreseeable future. As a major global economic entity, China's economy and development has been closely connected with the rest of the world and its financial market. Hence, how China's banking industry will be affected and how Chinese banks will weather this financial crisis is of utmost concern.

Xinhua Finance believes that the direct risks, including risks related to bond investments and loans, faced by China's banking system are still manageable, and credit risk exposure to export- driven enterprises is still limited. However, as market confidence declines, risks to banks posed by real estate development loans cannot be ignored, and retail banking will also suffer. Banking industry profits will be hindered by macro-economic policy adjustments the Chinese Government may adopt to prevent a possible economic slowdown. The ability of China's economy to continue to grow in the long run will depend on economic restructuring and transformation into an economy driven by domestic demand. Banks will play an important role in guiding the direction of capital flows. During this process, banks will need to find new areas for profit growth, and optimize loan and revenue structures. As China's banking regulators reconsider systemic risk implications, they may be more cautious in deciding whether to move forward with the suggested universal banking model.

1. Limited direct risk exposure, but real estate loans and retail banking

are likely to be affected.

1) Financial system is relatively closed, and risk exposure is manageable

Thanks to the relatively slow-paced development of China's financial system, and the fact that foreign investment by China's banking industry is subject to foreign exchange controls and regulatory approval, the banking industry's overall open foreign exchange exposure is relatively small. Only a handful of large state- owned banks, in particular the Bank of China, have been relatively heavily impacted by the Fannie Mae, Freddy Mac, and subprime mortgage securities crisis, and up until this point in time the impacts have been manageable. There has been almost no direct impact on small and medium sized banks. Total announced exposure of Chinese banks to Lehman Brothers has reached US$380 million, with ICBC topping the list. Examination of the exposure portfolio reveals that more than 50% is senior debt with high priority of repayment. It can be projected that the overall risk exposure is rather limited.

Xinhua Finance added up the total investment denominated in dollars for

ICBC, BOC and CCB, including trading assets, securities available for sale,

and securities held to maturity. As of June 30, 2008 the total amounted to

US$109.6 billion. These dollar denominated assets are mainly highly rated

government and commercial bank bonds. If one were to assume 10% are high risk

securities, the total loss would be around USD 11 billion. In comparison to

the total net profit of the three banks in 2007 of RMB 212.7 billion, this is

a manageable sum. (Note: net profit of 14 listed banks was RMB 286.9 billion

in 2007.)

Unit: 100 million USD

FX net Investments Subordinated Fannie Mae.