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WTO Forces Domestic Banks to Mature
Domestic banks should use the occasion of China's entry into the World Trade Organization as a reason to reform themselves and strengthen the domestic banking industry as a whole.
After China joins the WTO, more and more foreign banks will get into the country, shaking up the banking industry and causing it to reorganize along different lines.
Growing is a painful process, but one that is necessary for survival in the future. The increased competition arising from WTO entry and the introduction of foreign banks will help the banking industry to mature.
Most domestic banks are inefficient, particularly when it comes to settlement facilities, which have frequently been the sources of clients' complaints.
Having operated for decades in a monopolized market, many banks will be novices in many areas of which their foreign counterparts have an excellent command.
While striving to be stronger, domestic banks will, at the same time, face weakened credit among their clients, who will likely be lured by stronger foreign rivals. Domestic banks will probably also lose the fight for top employees. Many professional talents currently working with them will turn to foreign employers, who can offer a much fatter salary.
Instead of waiting idly for this situation to descend, domestic banks should begin preparing to make themselves as competitive as possible.
Banks should replace sole-ownership with a share holding system, which conforms better to modern bank management. They should also rationalize their decision-making body and strengthen supervision over it.
In order to lower risks, domestic banks need to keep a watchful eye on bad loans, which could considerably sap their competitiveness.
Compared with foreign banks, China's state-owned banks are much smaller in terms of size. While streamlining internal management, domestic banks should try to expand through purchasing or merging with other banks and financial institutions worldwide.
It would be a good idea for the domestic banks to enhance mutual cooperation in order to create a healthier market order and raise the overall competitiveness of the industry.
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