Access Asia has published this updated version of Banks in China covering the market and current state of development of the banking sector in China.
This report covers the retail banks both state and private as well as the foreign banks now operating in China.Banks have become increasingly important in China.
This is a major change from the 1970s and early 1980s when a cheque could take a month to clear and a national telecommunications network was not in place to facilitate inter provincial payments.
The banking sector is thought to be riddled with problems, many of which have become more transparent as the extent of the South East Asian economic crisis ahas emerged and the state has begun to tackle the financial problems of the large state owned enterprises.
From July 1, 1998 Premier Zhu Rongji gave the banking sector a shot in the arm by decreeing that the Chinese state would no longer supply flats at ‘peppercorn’ rents to new tenants.
Workers were to be encouraged to buy – a mortgage market was born in China.
With nine-tenths of all flats and homes in China owned by the government the potential for those taking up ‘the right to buy’ is immense.
Zhu actually instructed the largest domestic banks to lend US$ 12 billion against property in 1998 alone.
However, while banks are finding new sources of income – mortgages, currency services, financial products such as consumer loans – they remain laden with bad debts from the unproductive and unprofitable state owned enterprises.
In a global sense prospects for the major Chinese banks appear good given China’s emergence as a major economic superpower and consumer market.
However, the future role of banks within the PRC is far from clear.
The Southeast Asian crisis has revealed the urgent need to reorganise the Chinese banking sector.
Most analysts believe that tighter supervision is still required and that capitalisation requirements, assets quality, liquidity and profitability all need closer examination in the immediate future.