China's Banking Sector on Way to Success or Failure

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Last updated at: (Beijing Time) Monday, January 14, 2002

China's Banking Sector on Way to Success or Failure

Liu Mingkang, governor of the Bank of China, said January 12 the government is supposed to establish a leading reform commission to push the reform of the banking industry steadily forward due to its specialty. He highlighted three tasks facing the government at present.

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Three tasks

First, the government is expected to set overall aim for the reform, guaranteeing the continuity, foresight and transparency of the financial reform. The leading reform commission is required to be meticulous in planning the reform costs, launch proposals on digest costs and strengthen the supervision over extra expenditures.

Second, better financial legislation, encourage financial creativity and amend the financial rules and regulations not in line with the WTO. The government is supposed to formulate appropriate financial laws to protect the banking industry in use of some ensured provisions provided by the WTO for the developing countries so as to race against time for the development of the national financial sector.

Third, it's most important to build up credit in China. Currently, large gap exists between China's state-owned commercial banks and foreign banks in capital strength, said Liu, adding the capital sufficiency rate of the world top ten banks averaged 11.5 percent in 1999, of which Citibank was 12.43 percent and Swiss Credit Bank, 19.1 percent. However, China's rate was only as much less as 5.7 percent in 2000, according to the criteria of the Bank of China. It will be lower if based on the world criteria.

Gap between Chinese & foreign banks

Liu attributed the gap to China's mechanism, managerial model and information technology. The Bank of China had to retrench about 5,000 employees over the last two years on end.

Liu added the experts on Chinese problems from the World Bank once predicted it would take 10 years for China's banks to prepare for the entry of the WTO. His opinion is that it won't need 10 years if China's banks make a good preparation, otherwise 10 years are not enough. China's state-owned commercial banks must strive to be competitive ones in 5 to 10 years, or they couldn't survive.

Liu assumed the enemy of China's banking sector leaves nothing but the banks themselves.

China's Banking Industry to Be Better Developed: Experts

China's banking industry should undergo further reform to increase profits, experts said at a seminar which opened last December in east China port municipality Shanghai.

The two-day seminar, jointly held by the Shanghai Banking Association and the Singapore-based magazine "Asian Banker," is focusing on the prospects of China's banking industry.

The participating banking and insurance experts said that China's entry into the World Trade Organization will greatly change the overall environment for the banking industry. The operation guidelines of Chinese commercial banks will become increasingly unfavorable for the development of the banks.

Chinese commercial banks should attach greater importance to attracting more customers for more savings deposits and developing new banking services other than the balance of loans, experts said.

Recommended Book: Outlook on Banking Industry of China
Published: August 2000
Publisher: CIEC China International Economic Consultants
Language: English or simplified Chinese

by PD Online Staff Yang Ruoqian

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