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Big Changes Take Place in China's Banking Reform: BOC Chairman
China has made big achievements in the country's banking reform since the year before last, with more active participation in world communication, Bank of China (BOC) Chairman and President Liu Mingkang said Thursday, December 14.
China's central banking has changed a lot over the past years with more frequent and active participation in world communication and improvement in modern supervision and regulation, Liu told a luncheon in Hong Kong when attending the China Business Conference 2000.
Speaking of China's banking reform, Liu said the country's annual credit quotas have been phased out since the year before last, and lending is no longer driven by policy decree, but by commercial considerations.
He said the government injected 270 billion yuan (US$32.9 billion) to help the four big banks with their recapitalization exercise last year, raising their capital adequacy ratio to almost 8 percent from 3 percent on average.
Four asset management companies were also established, helping the big 4 banks to sell 1.3 trillion yuan (US$158.5 billion) non-performance-loans (NPLs) at face value, bringing down their NPLs level by around 10 percentage points, he added.
Competition is getting sharper and sharper in China, Liu said, adding that more and more local and foreign-oriented financial institutions are entering the market. About 170 operation entities including 150 branches and 13 foreign banks have been registered locally, helping improve the consciousness and quality of China's banking services.
Liu noted that many fading financial institutions have been closed down since the year before last.
To address the reforms of the stated-owned enterprises, Liu said progress is being made in adoption of more modern corporate structures by mergers and acquisitions, in injection of new capital through share issues, and in debt-equity swaps and huge staff reductions. A lot of quasi-fiscal responsibilities have been relieved, he added.
"The 4 big companies, Petrochina, China Unicom, China Petroleum & Chemical Corp. and China Mobile, like early-flying birds, floating in capital markets off China's mainland are now enjoying real share option schemes to their more than 1,000 top management staffs," Liu said.
China was recorded first increase in profits for some years in 1999 while about 1,700 loss making units went bust and more than 25 million redundants have been laid off by the end of this year, Liu said. "The run-in-red ones reduced from 6,599 to 4,098 by October, 2000, he added.
To build good corporate governance is a must to China's banking reform, and the BOC's corporate governance includes drawing up a clear-cut development strategy and a rational decision-making process, he said.
Liu said BOC will follow prudent accounting principles and to enhance transparency, to set up its performance targets, the accountability and responsibility system and intensify its staff training.
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