Private, foreign funds encouraged to join in commercial banks

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Last updated at: (Beijing Time) Tuesday, February 10, 2004

Private, foreign funds encouraged to join in commercial banks

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China encourages domestic private funds and foreign capital to become shareholders of Chinese commercial banks, since joint-stock commercial banks represent thetrend of future banking reform, said an official with the China Banking Regulatory Commission here Monday.

China now has 11 joint-stock commercial banks including the Minsheng Bank and the Shenzhen Development Bank, as well as four major state-owned commercial banks, namely the Industrial and Commercial Bank of China, the China Construction Bank, the Bank ofChina and the Agricultural Bank of China, which still dominate thefinancial market in China.

The official briefed on the basic guidelines for future reform and restructuring of urban commercial banks, saying that large-sized city commercial banks with good performances are encouraged to draw private funds and foreign investment as well as to merge with other city commercial banks on voluntary and market principles.

Figures showed most of the 112 city commercial banks around China have private shareholders, whose stocks account for more than 30 percent of their total capital stock, but such proportion is far less than that of joint-stock commercial banks.

About 70 percent of shares of the Minsheng Bank, China's first privately-owned bank, are held by private investors, and 72.43 percent of the Shenzhen Development Bank's shares are held by social investors, official statistics showed.

By the end of 2003, China's joint-stock banks boasted total assets of 3.817 trillion yuan (about 460 billion US dollars), witha non-performing loan rate of 6.5 percent, while city commercial banks had assets of 1.462 trillion yuan, with a non-performing loan rate of 12.85 percent.

China did not have non-state-owned commercial banks until January 1996, when Minsheng was established, the official said, but he added that the development pace of such joint-stock commercial banks was amazing.

The Minsheng Bank, also the first listed private bank in China,saw its total assets snowball to over 200 billion yuan (25 billionUS dollars) in 2003 from merely 1.38 billion yuan (168 million US dollars) in capital stock in 1996.

Since none of the "big four" state-owned banks are listed on the stock market, joint-stock commercial banks have emerged as an experiment by China to reform the country's decades-old banking system, under which all major commercial banks were state-owned and it was difficult for private firms to get loans from the banks.

Domestic private and foreign capital, however, still play a less significant role in China's banking industry. The "big four" state-owned banks make up for approximately 60 percent of all banking assets in China, official figures showed.

"China needs a group of truly commercial banks, and it is both crucial and feasible for non-state economic sectors to invest in China's financial and banking sector," said Jing Shuping, the founder of Minsheng.

With the increasing participation of private and foreign capital in China's banking sector, private enterprises will find it easier to get loans from banks in China, which will further stimulate the booming of private economy, some experts said.

Source: Xinhua

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