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This year marks the 40th anniversary of China’s reform and opening up. The world’s second largest economy has seen a remarkable transformation in its financial system ever since.
The past four decades saw China’s banking sector evolve into a modern financial system.
“Chinese banking sector has transferred from a place for deposit to a real commercial bank in the modern world,” said Professor John Gong from the University of International Business and Economics.
Chinese banks are also quite successful in terms of expanding business out of China, Gong said, noting he recently visited Bank of China’s New York office and found it is quite competitive there.
“Inside China, we have seen a lot of smaller banks emerge. Chinese banking industry is expanding greatly,” he added.
China's commercial banks started with the "big four"—the Industrial and Commercial Bank of China (ICBC), the Bank of China (BOC), the China Construction Bank (CCB), and the Agricultural Bank of China (ABC).
Now many private and regional banks and even county banks have emerged. Experts said that those smaller players reflected China’s overall growth in commercial banking.
“Smaller players is definitely a symbol of how China’s wealth has been spreading to more and more places. They became very profitable commercial banks as Chinese local entrepreneurs do so well,” said Robb Koepp, director of the Economist Corporate Network.
Foreign banks’ investment in China
China has gradually been lifting restrictions on foreign banks’ investment in China since reform and opening up.
President Xi Jinping's top economic advisor, Liu He, said on the World Economic Forum that China will implement further opening up measures in banking, securities and insurance sectors this year.
The opening up is gradually expanding foreign investors’ ownership of banks in China, said Koepp, “It is a win-win situation for both Chinese banks and foreign banks.”
Experts believe that the opening up could also ease banking risks in China, which has been the concern for years.
China's efforts in mitigating banking risks
Controlling financial risks, such as non-performing loans and shadow banks, has long been a priority for Chinese government.
Chinese authorities took real steps throughout 2017 to curb risks in the rapidly expanding financial market.
Thousands of banks, insurance and securities companies have received heavy fines for flouting market rules.
China has also specified new rules to regulate emerging businesses including cash loan and micro lending.
China Banking Regulatory Commission (CBRC) said in a statement that the non-performing loan ratio of commercial banks stood at 1.74 percent at the end of 2017, declined for the first time since 2012.
Chinese government has stepped up efforts to correct irregularities in banking sector, and the latest message from China's top leadership was that the tough stance will continue.
(CGTN)
