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|Monday, October 16, 2000, updated at 09:55(GMT+8)|
Financial Sector Faces New Hopes, ChallengesChinese banks will find the new millennium coming fraught with hopes and challenges.
They are expected to meet stronger competition from overseas counterparts as China has vowed to open its financial market wider after the country's entry into the World Trade Organization (WTO).
A timetable has already been set. One year after China joins the WTO, foreign banks will be permitted to offer foreign currency services to Chinese customers. The following year, they can provide renminbi business to China's enterprises. And five years after the WTO entry, they will be able to engage in individual renminbi services.
It is inevitable that in the future, foreign banks will carry out renminbi business in all major Chinese cities.
Although the four State-owned banks - the Industrial and Commercial Bank of China, the China Construction Bank, the Bank of China and the Agricultural Bank of China - account for the bulk of the domestic financial market, they will have to face many disadvantages in competition.
Foreign banks have many advantages. Most have long histories of business operation and have accumulated rich experience. Ample capital, advanced technology, complete organization structure, flexible operation mechanisms and highly-educated employees have made them competitive in the international market.
Domestic State-owned commercial banks may also face a "brain drain" with foreign banks' business expansion.
The transitional period after China joins WTO and before it fully opens its financial sector will be crucial to China's financial industry.
In order to integrate the domestic financial system into an international financial system, China needs to deepen its financial reform in line with modern financial rules.
In fact, the country's financial authorities and banks are quite clear about the urgency and have already started reforms.
All domestic banks have drafted their reform strategies to span their organizational framework, planning management, credit policies, information and technology systems, internal controls, human resources and payment systems.
To improve asset quality, four asset management companies were established in 1999 to take over non-performing assets from the four State-owned banks.
Going public is one of the alternatives to strengthen Chinese banks' power as it will help banks increase their capital adequacy and force them to improve their profit-making ability.
Small banks will pioneer the stock market in the coming one or two years. And the big four will surely follow but may take longer.
Wang Xuebing, president of the China Construction Bank, said he has a dream of building a domestic bank strong enough to compete with foreign banks across the globe.
That's been the dream of not only Wang, but also by all domestic bankers for a long time.
China's financial history in the past 1,000 years has witnessed both highs and lows.
China was the first country in the world to use paper currency. Around the year 1000, businessmen in Sichuan issued jiaozi, a kind of printed paper certificate, to replace the iron money.
In 1023, the authority of the Song Dynasty (960-1279) issued official jiaozi while banning private issuing.
Paper money proved popular in the Yuan Dynasty (1271-1368) with a new name of baochao. The Yuan government drafted a set of regulations about the issuing and circulation of paper currency to form the first paper-money system in the world.
The government ordered all payments to be made with baochao while gold, silver and copper coins were prohibited from circulation.
The large scale issue of paper currency ended its 700-year life in the early Ming Dynasty (1368-1644). Although the Ming and Qing (1644-1911) governments later issued paper currency several times, the circulation was short-lived due to high inflation.
Some credit institutions in the Ming and Qing dynasties, like qianzhuang and piaohao, had emerged to do part of the banking business, they never grew into real modern banks as the small-scale peasant economy in China failed to create enough demands for the birth of banks.
The modern bank was born in China only after the First Opium War ended in China's defeat in 1842.
Following the Oriental Banking Corporation, which set up a branch in Shanghai in 1845, many foreign banks flooded into China.
Foreign banks formed a network which controlled China's finance. They monopolized China's foreign trade, foreign-exchange banking, issued banknotes and manipulated exchange rates.
Through loans to the Qing government, foreign banks seized possession of various political privileges.
They not only overwhelmed China's national capital in the competitive sale of goods, but also held China's finance and banking sectors by the throat.
This sparked the determination of the Chinese people to start their own banks.
The first Chinese bank, the Imperial Bank of China, was established on May 27, 1897, in Shanghai.
The Bank of the Board of Revenue, the first national bank jointly run by the government and private interests, was established in August 1905 in Beijing. The bank was renamed Daqing Bank in 1908 and was authorized by the Qing government to issue money, manage the State treasury and deal with State debts.
After the Qing Dynasty was overthrown in 1911, many domestic banks were established, but none of them have grown strong enough to compete with their foreign counterparts.
China's financial industry enjoyed sound growth after 1949 when the People's Republic of China was established and especially after the country adopted its opening policy in 1978.
As the country has committed itself to building the market economy, the financial sector is set to play a more important role in the national economy.
And the country's determination to be integrated with the world economy would create a strong foundation for the growth of Chinese banks in the coming millennium.
The dream to build an internationally strong bank has been around for a long time. It is destined to come true - and will not take another 1,000 years.
But patience and continued efforts are still needed. (Source: chinadaily.com.cn)
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