Domestic & Foreign Banks Compete for China's Individual Financing Market

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Last updated at: (Beijing Time) Friday, August 22, 2003

Domestic & Foreign Banks Compete for China's Individual Financing Market

Recently ten branches of Guangdong Development Bank simultaneously held a news briefing about "financing with sincere service" business and inauguration ceremony of wealth management center. This move marks the domestic individual financing market henceforth enters a new era of wealth management.

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Recently ten branches of Guangdong Development Bank (hereinafter referred to as GDB) in Beijing, Shanghai, Guangzhou, Shenzhen etc simultaneously held a news briefing about "financing with sincere service" business and inauguration ceremony of wealth management center. This move marks the domestic individual financing market henceforth enters a new era of wealth management.

Individual financing market has long been regarded as "the biggest chunk of cheese" of individual business for commercial banks. So domestic commercial banks open up this business in succession, while foreign banks enter the Chinese market taking "financing for higher-end clients" the undercutting point.

Data show that overseas individual financing business, boosted by tides of financial innovation, has been expanding rapidly since the 1970's. During the past years the average annual profit margin in individual financing business has been as high as 35 percent for American banks, coupled with 12-15 percent of average annual profit growth rate. For instance, 40 percent of the gross earnings of Citibank have been raked in from the individual financing business since the 1990's. As for China, the balance of saving deposits of domestic residents has topped 1 trillion yuan, growing at a rate of two percentage points more than that of economic growth. In areas such as Beijing, 20 percent of households possess 66 percent of the total financial assets of residents, and those with over 300,000 yuan of investment assets make up over 10 percent of the total number of households. According to the 80:20 Principle discovered by Italian economist Vilfredo Pareto, a minority of higher-end clients creates a majority of returns.

In this sense, the household financial management market is an enormous gold mine, which is awaiting exploration.

So far, GDB has established a network of over 570 service centers and formed a nationwide pattern of shareholding commercial banks. Nevertheless, persons responsible of GDB still see imbalance in the business development. In order to bolster new profit growth points, GDB starts "grabbing a lump of cheese".

Information confirms that following the 10 first comers, major branches and sub-branches of GDB across the country will set up wealth management centers in batches this year, only to form a nationwide network system of wealth management and service.

By PD Online Staff Zhu Lizhen

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