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Bank reform goes on

By Song Shengxia  (Global Times)

08:10, May 28, 2012

China's banking regulator announced over the weekend that it will encourage greater private investment in the banking sector without imposing restrictive or other additional conditions, as part of the government's efforts to tap the potential of the private sector at a time of economic slowdown.

The move by China Banking Regulatory Commission (CBRC) is the latest in a series of measures by the ministries, commissions and government agencies in recent weeks to allow greater participation of private capital in relevant sectors.

Private businesses can invest in financial institutions in the banking sector through private stock placements and new share subscriptions, equity transfer and mergers and acquisitions, the CBRC said in a guideline released on its website over the weekend.

Private capital is encouraged to join in the restructuring of city commercial banks. If private businesses participate in the risk disposal of the city commercial banks, their shareholding ratio could be extended to 20 percent, the guideline said.

The guideline also lowered the minimum shareholding of the main initiator for a village and township bank to 15 percent from 20 percent.

The banking regulatory bodies at different levels shall not impose restrictive or other additional conditions separately for investment of private capital in the banking sector, the guidelines said.

"State-owned banks have dominated the financial market in the past, while private financial institutions are underdeveloped, causing many problems such as discrimination against small companies in granting bank loans, which restricts their growth and pushes up their operating cost," Wang Xiaolu, deputy director of the National Economic Research Institute under the China Reform Foundation, told the Global Times.

"The CBRC's announcement is a major breakthrough in allowing more private capital to enter and compete fairly in the financial market and help improve the country's financing environment," he said.

Meanwhile, the China Securities Regulatory Commission announced Friday that it would encourage private investment in securities and futures brokerages and will modify rules to help private businesses to raise capital.

On the same day, the State-owned Assets Supervision and Administration Commission of the State Council, the watchdog of the country's State-owned enterprises (SOEs), announced that China would encourage private investment in SOEs when they restructure or sell shares.

"The macro economy is now facing the downward pressure. Introducing additional resources especially private capital into the manufacturing, consumer and financial sectors is key to boosting the economy," Zhao Xijun, deputy director of the School of Finance at Renmin University of China, told the Global Times yesterday.

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