China's WTO Entry Brings Challenges to Domestic Banks

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Last updated at: (Beijing Time) Friday, November 23, 2001

China's WTO Entry Brings Challenges to Domestic Banks

Facing tougher competition after China's WTO accession, Chinese banks should learn from theirforeign counterparts how to overcome their weaknesses, Liu Mingkang, chairman and president of the Bank of China, said

Liu said in an interview with Xinhua here that the Chinese banking sector has made remarkable progress in recent years with the number and scale of domestic banks expanding rapidly.

Currently, China has 104 commercial banks with total assets of 12.6 trillion yuan (about 1.5 trillion U.S. dollars). The number and total assets of the banks are 4.8 times and 50 percent, respectively, more than five years ago.

Liu said that compared with overseas banks, domestic banks havemany advantages, such as the comprehensive nationwide network, a thorough understanding of domestic policies and markets, good local client bases and superiority in operating renminbi businesses.

The problems that exist include weak risk-control abilities, a high percentage of non-performing assets and insufficient cooperation both among themselves and with foreign banks, Liu added.

Overseas banks possess less than three percent of China's totalfinancial assets at present. Their non-performing loans account for 12 percent of their total loans, less than that of their Chinese counterparts, according to Liu.

In addition, foreign banks have their own strong points, such as advanced e-commerce systems, superiority in operating businesses involving foreign currencies, acquaintance with global markets and rich experience in operation, Liu added.

Liu said that domestic banks should, while increasing cooperation among themselves, strengthen the ties with their foreign counterparts, learning from their advanced management expertise so as to enhance the competitiveness.

Up till now, overseas banks have established in China 193 subsidiary financial institutions with a total assets of 34.5 billion U.S. dollars, up 81.6 percent over five years ago. Among them, 32 have been approved to operate renminbi businesses.