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People's Daily Online>>China Politics

Banking monopoly by State sector targeted (2)

By Gao Changxin  (China Daily)

08:40, April 05, 2012

The Wenzhou reform was announced by a State Council executive meeting on March 28. It allows private financial services, including setting up village banks and rural financial cooperatives.

Wang Jianhui, chief economist with Southwest Securities Co Ltd, said that a more competitive banking sector would significantly boost the vitality of private businesses.

"The monopoly in the sector makes getting loans expensive. Private businesses, especially smaller ones, have to get cheaper loans to flourish.''

Qiu Zhiming, president of the privately owned Beifa Group, a maker of stationery in Ningbo, Zhejiang province, said big State-owned lenders are charging his company twice as much as the benchmark interest rate by imposing various charges. He said banks always think up new ways to charge his company more and if he doesn't accept it then he does not get the loan.

"At the end of the day you find that a significant part of the profit goes to the banks," he said. "Something has to be done, urgently."

Under the current system, State-owned banks live off an effectively guaranteed spread between deposit and lending rates that are set by the central bank. The spread now stands at around 3 percentage points.

The so-called Big Four banks — Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China — raked in a combined profit of about 630 billion yuan ($100 billion) last year against a backdrop of slowing economic growth.

Reflecting on the fat profits of banks, Hong Qi, president of China Minsheng Banking Corp, even said at a forum late last year that the sector's profit was so high but profit for industrial companies was so low that he sometimes felt upset to talk about his bank's profit. Minsheng's annual report, published in March, showed a surge in profit of more than 58 percent in 2011, to 27.9 billion yuan.


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