Liu Mingkang, Chairman of the China Banking Regulatory Commission, introduced the latest development in the country's banking sector at a press conference held in Beijing on Monday.

Total assets exceed US$4.47 trillion
 
Banking institutions registered 36.2 trillion yuan (US$4.47 trillion) of assets in both local and foreign currencies by the end of October, up 19.2 percent from a year earlier. The combined assets of the banking institutions accounted for more than 90 percent of the total assets of all financial institutions in the country.

China's banking system consisted of over 30,000 institutions, including three policy banks, four state-owned commercial banks, 13 joint-stock commercial banks, 115 city commercial banks, 626 urban credit cooperatives, 30,438 rural credit cooperatives, 57 rural cooperative/commercial banks, 238 operational entities of foreign banks, four asset management companies, 59 trust and investment companies, 74 finance companies affiliated to business groups, 12 financial leasing companies, and five auto financing companies, as well as a large number of postal savings institutions scattered around the country.

Risk management capacity improved

By the end of September 2005, the number of banks having met the regulatory capital requirement of 8 percent amounted to 35, a rise of 5 from the year beginning. These banks owned 68.1 percent of the total banking assets in China, an increase of 20.6 percentage points during the same period, he said.

In 2005, CBRC adopted three new tools to strengthen supervision over banks' non-performing loans, namely making peer group comparison, assessing the deviation of the accuracy of loan classifications and tracking the migration of loans of different categories, Liu said.

By the end of September, the non-performing loans of all commercial banks in China had totaled 1.3 trillion yuan (US$160 billion), down 550.2 billion yuan from the year beginning, and the non-performing loan ratio dropped by 4.3 percentage points to 8.6 percent, falling into one digit for the first time, he said.

Innovations encouraged

The CBRC promulgated the Guidelines on Banks' Lending to Small Enterprises to promote institutional and product innovation with a view to encouraging, promoting, directing and coordinating banks' financial services to small businesses, he said.

The CBRC issued the Provisional Rules on Commercial Banks' Wealth Management Business so as to guide and standardize such businesses to provide the consumers with more diversified investment instruments, he said.

In order to advance the process of the securitization of credit assets, the CBRC has promulgated the Administrative Rules for Pilot Securitization of Credit Assets without delay, he said.

For the purpose of regulating and facilitating financial innovations in banking institutions, a new department in charge of supervisory cooperation for banking business innovation was established by the CBRC, so as to set out unified prudent supervisory standards and manuals for banking business innovations and thus better guide and promote the development of the business innovation activities of the Chinese banking industry, he said.

Opening wider

Liu Mingkang said at the conference that foreign banks may enjoy more relaxed markets entry criteria when applying for conducting renminbi (RMB) businesses in China's central, western and northeastern regions.

He said China gave the green light for foreign financial institutions to do renminbi-denominated business in seven more cities: Shantou, Ningbo, Harbin, Changchun, Lanzhou, Yinchuan and Nanning.

The CBRC once again substantially lowered the minimum operating capital requirements for foreign banks in China to conduct renminbi business, and will make adjustments on proportion of the total amount of foreign exchange deposits taken within Chinese territory by foreign-funded financial institutions.

Currently, a total of 71 foreign banks from 20 countries and regions had set up 238 operational entities in China by the end of October this year. Meanwhile, 173 foreign banks from 40 countries and regions have set up 238 representative offices in 23 cities.

The total assets of foreign banks in China amounted to US$84.5 billion, accounting for about 2 percent of the total banking assets in China. The foreign currency loans made by them accounted for 20 percent of those made by all banking institutions in China.

While honoring its World Trade Organization commitments, China also opened a number of new businesses for foreign banks, such as custodian services for qualified foreign institutional investors (QFII), insurance agency business, custody business for overseas use of insurance foreign exchange funds, and custody business for stock assets of insurance companies.

Public listing not cause state asset losses

Chairman Liu Mingkang said the country did not sell too cheaply its state banks through stock market listings on the back of stringent requirement for foreign investors.

Foreign investors should hold a minimum of a 5 percent stake at a Chinese bank, and are not allowed to sell that holding in three years, he said. Strategic investors are required to send directors to the Chinese banks to help decision-making and encouraged to bring in senior managers.

Meanwhile, the CBRC stipulates a single foreign financial institution should invest in no more than two Chinese banks, which Liu said is aimed at "avoiding interest conflicts and market monopoly."

These criteria for foreign investors mean that they actually have very limited chances for speculative profits, he said. "They have to exert their own efforts so as to achieve long-term cooperation and win-win results with Chinese banks."

The Oct. 27 listing of China Construction Bank in Hong Kong -- the first by a Chinese state bank -- has led to allegations that its initial public offering price was too low, which Liu Mingkang also denied.

(Xinhua News Agency December 5, 2005)