BANKING SECTOR IN CHINA

1
BANKING SECTOR IN CHINA
2
Overall China Banking System
Central Bank PBOC
Commercial Banks
Policy Banks

• State Commercial Banks
• National Commercial Banks
• Regional Commercial Banks
• City Commercial Bank
• Foreign Bank
• Joint-Venture Banks
• Foreign Bank Branches

• China Development Bank
• Export/Import Bank
• Agricultural Development Bank

• Foreign Banks
• 190 foreign banks
• Other Institutions
• 136 trust investment
• companies
• 71 financial companies
• 12 lease companies

State Commercial Banks
National Joint-Stock Commercial Banks
Other Commercial Banks

• Industrial Commercial
• Bank of China
• Agricultural Bank of China
• Bank of China
• China Construction Bank

• Bank of Communications
• CITIC Industrial Bank
• China Everbright Bank
• Hua Xia Bank
• China Minsheng Banking
• Corporation (1)
• Guangdong Development Bank
• Shenzhen Development Bank (2)
• China Merchants Bank
• Shanghai Pudong Development
• Bank
• Fujian Industrial Bank

• 109 city commercial banks
• 1,049 urban cooperatives
• 38,057 rural cooperatives

Note (1) Chinas first non-state joint-stock
commercial bank approved Nov 1994, operational
Jan 1996, listed Dec 2000 (2) The first bank
listed on Chinas stock exchange. Since then
Pudong Development Bank in 1999, and Minsheng in
2000, and CMB in 2002 Source HSBC, PBOC, CICC
A.T. Kearney
3
CURRENT SITUATION

• Banking Reforms underway but need to be
  accelerated
• Local banks feel WTO pressure
• NPLs continue
• Abundant talent but lacking fundamental skills
• Limited product offerings
• Undercapitalized

4
Challenges

• Vicious growth cycle
• Issues endemic to Chinese system /culture
• Mindset change required both internally and
  externally
• Evaluation and incentives
• Network rationalization and reduction of
  operating ratios

5
What Banks have to do

• Stop the bleeding
• Buck the system
• Grow strategically
• Embrace new concepts
• Take advantage of foreign entry

6
Conclusion

• Sound banking system key to economic success
  across all industries
• Investments need funding sources in addition to
  equity i.e. leverage/bank financing
• Financial sector has tremendous potential, but
  investors need flexibility and ability to react
  to changing regulatory environment
• Long term perspective