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China's Big Four State-owned banks are urged to speed up their restructuring and inner reforms to build themselves into internationally competitive commercial banks over the next five years or so, bankers said at a financial conference in Beijing yesterday.
"Comprehensive reforms are needed for the four banks and we have felt the pressure for faster moves before China's banking sector entirely opens up to foreign banks," said Jiang Jianqing, governor of the Industrial and Commercial Bank of China (ICBC), one of the Big Four.
And a clear timetable should be set for the reform to ensure the pace, Jiang added.
High numbers of non-performing loans (NPLs) and other financial burdens left from the planned economy pose the biggest challenge to banking reform.
China set up four asset-management companies in 1999 to take over more than 1.4 trillion yuan (US$170 billion) in NPLs from the four State-owned banks, which are ICBC, the China Construction Bank, the Bank of China and the Agricultural Bank of China.
Despite the move, the amount of NPLs at the four banks has remained roughly the same.
Though the banks' NPL ratio has been declining by about 2-3 percentage points each year, it will still take at least five years for the rate to drop to 10 percent, which would be close to the ratio of most viable international banks.
The basic cure for the problem is to reform the old banking system to build up a shareholding structure and corporate governance in the presently wholly State-owned banks, said Zhang Enzhao, governor of the China Construction Bank (CCB), who also attended the forum.
Reform will help form a modern financial corporate system in China. It will also clear the way for these State banks to go public, a professed goal of theirs.
ICBC's Jiang said preparations for a public listing would take five years or more. CCB had given a similar timetable before.
While the restructuring is already under way, opinions have been split as to whether the whole body or just the better parts of banks like ICBC should be listed.
But lately, the first opinion seems to have got the upper hand, said Li Yang, a member of the Monetary Policy Committee of the central People's Bank of China and also a leading economist at the Chinese Academy of Social Sciences.
China needs big banks that provide comprehensive services. The greatest value of the Big Four stems from their large network and deep pool of client resources. So the whole body of the banks should be restructured and made public instead of just the best parts, said Li.
However, going public does not automatically cure all problems, he added.
(China Daily December 5, 2002)
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