China will not risk undermining the nation's banking reform process by hastening the listing of its major state-owned banks, a top banking regulator said yesterday.

Tang Shuangning, vice-chairman of the China Banking Regulatory Commission (CBRC), stressed that listing is not the aim of banking reform but merely a means to restructure current operational systems and equity structures.

He made the statement at a three-day International Finance Forum held in Xianghe, Hebei Province whilst reporting on changes at the Bank of China (BOC) and China Construction Bank (CCB).

The BOC has completed the initial round of selecting strategic investors, while CCB has already found three domestic institutional investors, he said. Both banks have completed much of their financial restructuring and drafted strategic development plans for the following years.

They have also chosen relevant intermediaries to head towards the listing, but there is still much hard work ahead, according to Tang.

BOC Assistant President Zhu Min said that "no timetable for listing" does not mean that reform is being slowed. He told reporters that the final choice of strategic investors has yet to be made.

Zhu also denied recent reports that the bank had given up the idea of listing in Hong Kong. "We have not decided on the location of the listing yet," he said.

As for the banks' internal reforms, changing traditional management concepts and methods is the biggest challenge, according to experts.

Jeffrey R. Shafer, vice-chairman of the Public Sector Client Group at US-based Citigroup, said changing the culture of a bank is difficult, but China must do this to ensure it avoids huge non-performing loans (NPL) in the future.

"China's banking industry is facing mounting pressure because of the huge gap between mechanisms and philosophies with international practices, and we don't have much time left as China implements its World Trade Organization commitments," said Zhu Dengshan, president of China Cinda Asset Management Corporation.

The BOC's NPL ratio has fallen to 5.31 percent and it earned 49.7 billion yuan (US$5.99 billion) gross profits in the first nine months of this year, a 23.4 percent increase year-on-year, which Zhu described as a "quite satisfactory figure.”

"We are now paying more attention to capital adequacy and balance sheet management. The capital adequacy rate of the BOC has topped 8.93 percent, exceeding the required 8 percent," Zhu said, "What we care about more in running the business now is the return on assets and shareholders rather than the expansion of scale."

In spite of positive progress, a huge amount of NPLs still hang heavily around the neck of China's banking industry.

According to the CBRC, the country's major commercial banks had NPLs valued at 1.7 trillion yuan (US$204.7 billion) at the end of September, with an NPL ratio of 13.37 percent, down 4.39 percentage points from the start of the year.

(China Daily November 12, 2004)