Abstract
This paper examines the main characteristics of the Chinese banking industry. In particular, it analyses the main performance indicators of the system together with some prospects of future development. The paper also considers the problems related to high levels of non-performing loans and the internationalization paths of the Chinese banking market. In spite of some recent reforms, further legislative improvements are required to develop the system and to allow a gradual opening to foreign competition.
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Notes
Official statistics have been considering a fifth bank, Bank of Communication (BOCOM), in State-owned banks since March 2007. In this study, however, that bank is not considered because its data at the end of 2006 were not self-important.
All data refer to 2005.
Equivalent to about € 229,6 billion (exchange rate: 31.12.2003).
Cinda for China Construction Bank; Huarong for Industrial and Commercial Bank of China; Orient for Bank of China and Great Wall and for the Agricultural Bank of China. The AMCs have been subject to a considerable reform process. In February 2004, the State Council approved a proposal by the Minister of Finance, according to which the AMCs should be transformed into genuine commercial companies after 2006, the deadline to complete the transfer of debts from the big four. This should ensure that management companies will be able to use the equity capital in order to purchase non-performing assets on the basis of commercial criteria: it is widely believed that the reform will lead to the restructuring of debtor companies in order to attract strategic investors, both domestic and foreign.
Chinese population savings rate, equal to about 25% of disposable income, remains high, despite a low real interest rate on bank deposits. The high level of savings reflects the demographic development of the country, with the gradual ageing of the population, the uncertainty regarding the pension benefits, health care and education, and limited access to credit by individuals for purchasing durable goods and housing.
The pilot project to transform the Bank of China and China Construction Bank into joint-stock companies is being carried out with the aim of creating modern commercial banks, with share capital, and internationally competitive. The recapitalization of the three major Chinese banks began in 2003, with a capital contribution by the People’s Bank of China, amounting to 22.5 billion dollars in the Bank of China and in the China Construction Bank. The same recapitalization continued in April 2005, with the contribution of 15 billion dollars to the Industrial and Commercial Bank of China.
The term foreign-funded banks in these regulations means:
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Wholly foreign-funded bank, funded solely by a foreign bank or jointly with any other foreign financial institution;
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Chinese-foreign joint venture bank, jointly funded by a foreign financial institution with a Chinese company or enterprise;
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Branch of a foreign bank;
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Representative office of a foreign bank.
In these Regulations, Wholly foreign-owned banks, Chinese-foreign joint venture banks and the Branches of a foreign bank are collectively referred to Operational foreign banking entities.
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Equivalent to about € 96.7 million (exchange rate: 01.08.2007).
Equivalent to about € 9.7 million (exchange rate: 01.08.2007).
Equivalent to about € 19.3 million (exchange rate: 01.08.2007). The State Council, for prudential purposes, can raise the above minimum capital requirements.
Equivalent to about € 96,700 (exchange rate: 01.08.2007).
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Geretto, E., Pauluzzo, R. The Chinese Banking System: Economic Performance and Prospects for Future Development. Transit Stud Rev 16, 92–113 (2009). https://doi.org/10.1007/s11300-009-0055-4
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DOI: https://doi.org/10.1007/s11300-009-0055-4