Lining up in front of a counter in a small Bank of China branch
in Haikou, the largest city in Hainan Province, Hong Kong
businessman Samuel Hui has learnt to put aside at least half an
hour to complete his banking transactions.
"Unlike Hong Kong, customers here have to be patient and bear
with the slow process," Hui said.
For Hui, who shuttles between Hong Kong and Hainan, the
deficiencies of the mainland's banking system are particularly
glaring.
However, things are changing. Since the central government
opened up the domestic market to allow overseas banks to run
renminbi businesses for mainlanders last year, more and more such
banks have deepened their footprints on the mainland.
Their entry poses a challenge to local lenders. But these
lenders also stand to gain in terms of richer management
experiences of overseas banks.
Billy Mak, associate professor of the Hong Kong Baptist
University, pointed out that mainland lenders still lag behind
their international counterparts in terms of risk management,
service diversification and corporate governance. "Learning from
the practices of overseas banks will substantially raise the
quality of mainland lenders."
Mak said mainland lenders take a relatively lenient stance on
risk management.
"Bank of China has disclosed it holds $9.65 billion of US
mortgage-related debts. In keeping with their bookkeeping
practices, overseas banks would adopt a more prudential approach to
deal with the debts," Mak said.
With the opening up of the financial market, domestic lenders
will be involved in more complicated businesses and will have to
adhere to international rules. Mainland banks should also try to
earn more from non-interest income, Mak pointed out.
"Given that interest and non-interest incomes of Hong Kong banks
are split in the proportion of 6:4, mainland lenders should tap
into the non-interest market."
Mak said he believed that mainland lenders will diversify their
income sources by widening the scope of their services and
products. "With the stimulus of market competition, they will press
ahead to release more investment products."
Lack of efficiency and hospitality used to be a common symptom
of mainland banks. "I think the situation will gradually improve
when more overseas banks hit the market."
According to a report from consultancy China Chengxin
International, the financial health of State-controlled banks has
substantially strengthened as a result of their structural
reforms.
(China Daily August 30, 2007)
