Chinese Banks to Review Strategies to Stay CompetitiveChina's entry to the World Trade Organization could force large domestic Chinese banks to consider seeking capital from sources other than the state in order to effectively counter foreign competition.This could push banks toward Initial Public Offerings (IPOs) and tapping the international capital markets, said Credit Suisse First Boston (CSFB) in a report released Friday in Hong Kong on China's financial sector reform. John Hobson, CSFB's director and head of the Asian Banking Research, pointed out in the report that the successful listing of the Chinese banks will be dependent upon factors including corporate governance and disclosure, legal and regulatory framework, operational efficiency, technology and most importantly, credit quality. "The four largest state-owned banks, Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China, control approximately 70 percent of the banking system including problem assets," said Hobson. The four asset management companies set up by the four banks had already taken on problem loans totaling 350 billion yuan (US$39.5 billion) by late 1999 and a total of 1 trillion yuan (US$121.95 billlion) is expected to be carved out from the banking system soon. This will undoubtedly help improve the asset quality of the state-owned banks and is an important step forward. China's entry to the WTO will allow foreign integrated financial groups access to the market. "In order to survive the fierce competition, we believe Chinese financial services supermarkets will need to emerge. In our view, the regulatory framework will also need to adapt further and possibly a super-regulator will emerge as has occurred in some other markets," added Hobson. |
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