Chinas Banking Industry

1
Chinas Banking Industry

• Ronille Pabico
• June 5, 2007
• ECON 461

2
Supervisory Banks

• Peoples Bank of China (PBOC)
• Keeps track of Chinas Gold reserves, runs
  foreign exchange transactions, and oversees the
  banking sectors clearing, settlement, and
  payment systems
• Autonomy to set interest rates for commercial
  banks
• State Council keeps oversight on PBOC policies

• China Banking Regulatory Commission (CBRC)
• Established in April 2003 to take over
  supervisory role of the PBOC
• Responsible for regulating and supervising banks
  to ensure that China has a safe and secure bank
  system.

3
Domestic Banks

• Big Four
• Industrial and Commercial Bank of China (ICBC)
• Second largest bank in the world by market value,
  right after Citibank
• Largest of the Big Four
• Bank of China (BOC)
• Specializes in foreign-exchange transaction and
  trade finance
• China Construction Bank (CCB)
• Specializes in moderate to long-term credit for
  specific long-term projects
• Agricultural Bank of China (ABC)
• Specializes in financing Chinas agricultural
  sector and provides bank services for TV
• ICBC, BOC, CCB successfully made Initial Public
  Offerings (IPOs) totaling 42 Billion Dollars

4
Domestic Banks (cont)

• Policy Banks
• Agricultural Development Bank of China (ADBC)
• China Development Bank (CDB)
• Export Import Bank of China (Chexim)
• Established to gain control over
  government-directed spending for the Big Four
• Responsible for financing state-invested projects
• Second Tier Commercial Banks
• Smaller then the Big Four Banks
• More profitable, better asset quality, and lower
  ratio of non-performing loans
• International Trust and Investment Corporations
  (ITIC)
• Focuses on merchant and investment banking
  activities

5
Foreign Banks and China

• Currently have signed partnerships with HSBC,
  Citigroup, and America Express
• HSBC partnered with Bank of Shanghai
• Citigroup holds a 67 million dollar investment
  with Shanghai Pudong Development Bank
• American Express is partnered with ICBC
• Some are hesitant to enter Chinas industry due
  to high ratio of non-performing loans

6
Bank Cards

• China has issued 714 million bank cards since
  1985
• 96 are debit cards
• Some bank card are dual-currency
• US (dollars) and China (RMB)
• Average amount of one transaction with a bank
  card is 258 dollars
• Used to buy cars, homes, and pay for utility
  bills
• Currently have 300,000 merchants accepting bank
  cards
• 2

7
Expectations for 2008 Olympics Games

• Increase economy and improve service
• By 2008, 90 of merchants near the Olympic venues
  will accept foreign bank cards
• Limited amount of banks permitted to accept
  foreign bank cards at their ATMs

8
Current Obstacles

• Lack of credit bureau info
• Lack of Merchants with card processing

9
ICBCs IPO

• Gordon Chang
• Believes that Chinas high ratio of
  non-performing loans will destroy the Peoples
  Republic of Chinas (PRCs) financial system
• ICBC, at the end of 2004 had 19.1 of
  non-performing loans
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