China's fifth largest commercial bank, the Bank of Communications, is set to become the first commercial bank in the country to begin operations for open-end fund business, China Daily has learned.
Open-end fund business is when an unlimited number of shares can be sold and redeemed at any time directly to the shareholders, enabling the shareholding to increase. Closed-end funds have a fixed number of shares and are traded like other stocks on an exchange, or over the counter.
Sources told China Daily Friday that the operation is expected to open in April or May this year.
Open-end fund operators are still awaiting approval from China's Securities Regulatory Commission, the watchdog for China's stock markets. Two companies, including one of the bank's client companies, are expected to be the early birds to get involved in the open-end business market.
China's move to open-end fund business is expected to upgrade the securities operation to take on more diverse practices. It should be a strong boost to the growth of the stock markets.
At the moment, the Bank of Communications is busy readying itself for an overseas flotation by streamlining its operation and slowing brain drains.
Senior officials of the bank said Friday that efforts would be stepped up to set up the operation with global rules to better prepare for heated competition from foreign banks.
Pressure is growing on domestic banks as China's pending entry to the World Trade Organization will entice a big wave of foreign operation.
Jin Dajian, president of the bank's Shanghai branch, told China Daily that domestic banks aspiring for an overseas listing should focus on sustainable profitability.
"A rush move of listing could generate a backlash. We don't want to suffer a roller-coaster ride of China's dotcoms in the NASDAQ. We want a smooth trip in the overseas stock houses," said Jin.
A host of commercial banks, including the Shanghai Pudong Development Bank, Shenzhen Development Bank and China Minsheng Banking Corp, have floated overseas with a rave response.
Wanting to join the bandwagon are the China Merchant's Bank and the Huaxia Bank, which are busy preparing for an initial public offering late this year.
The "Big Four" State-owned commercial banks are considering a similar move, but domestic banks are on the defence.
"Domestic banks are weak in systems, operation and talents -- the biggest stumbling blocks to getting their operation up to speed in a global dimension," said Lin Hua, an official of the Bank of Communications, Shanghai Branch.
But Jin said a sharp restructuring of the operation will get under way this year, including reducing red tape and allowing a more flexible flow of personnel.
"We need new blood to upgrade the talent pool for foreign competition. Professionals in bank consulting, auditing and marketing are running short," said Jin, whose company will begin a dramatic increase in incentives and bonuses for good work this year.
Business outlook for individual loans for cars, housing and education will continue to rise this year. .
A third of the 1.5 billion yuan (US$180.7 million) loans for industrial and consumption financing this year will be used for individual financing, targeting a booming car, housing and education consumption market in Shanghai, said Jin.
Loans from the Shanghai Branch for individual consumption last year secured an increase of 1 billion yuan (US$120.4 million), a growth of 309 per cent over the same period in 1999.
(China Daily 01/20/2001)
