China will not risk undermining the nation's banking reform
process by hastening the listing of its major state-owned banks, a
top banking regulator said yesterday.
Tang Shuangning, vice-chairman of the China Banking Regulatory
Commission (CBRC),
stressed that listing is not the aim of banking reform but merely a
means to restructure current operational systems and equity
structures.
He made the statement at a three-day International Finance Forum
held in Xianghe, Hebei
Province whilst reporting on changes at the Bank of China (BOC)
and China Construction Bank (CCB).
The BOC has completed the initial round of selecting strategic
investors, while CCB has already found three domestic institutional
investors, he said. Both banks have completed much of their
financial restructuring and drafted strategic development plans for
the following years.
They have also chosen relevant intermediaries to head towards
the listing, but there is still much hard work ahead, according to
Tang.
BOC Assistant President Zhu Min said that "no timetable for
listing" does not mean that reform is being slowed. He told
reporters that the final choice of strategic investors has yet to
be made.
Zhu also denied recent reports that the bank had given up the
idea of listing in Hong Kong. "We have not decided on the location
of the listing yet," he said.
As for the banks' internal reforms, changing traditional
management concepts and methods is the biggest challenge, according
to experts.
Jeffrey R. Shafer, vice-chairman of the Public Sector Client
Group at US-based Citigroup, said changing the culture of a bank is
difficult, but China must do this to ensure it avoids huge
non-performing loans (NPL) in the future.
"China's banking industry is facing mounting pressure because of
the huge gap between mechanisms and philosophies with international
practices, and we don't have much time left as China implements its
World Trade Organization commitments," said Zhu Dengshan, president
of China Cinda Asset Management Corporation.
The BOC's NPL ratio has fallen to 5.31 percent and it earned
49.7 billion yuan (US$5.99 billion) gross profits in the first nine
months of this year, a 23.4 percent increase year-on-year, which
Zhu described as a "quite satisfactory figure.”
"We are now paying more attention to capital adequacy and
balance sheet management. The capital adequacy rate of the BOC has
topped 8.93 percent, exceeding the required 8 percent," Zhu said,
"What we care about more in running the business now is the return
on assets and shareholders rather than the expansion of scale."
In spite of positive progress, a huge amount of NPLs still hang
heavily around the neck of China's banking industry.
According to the CBRC, the country's major commercial banks had
NPLs valued at 1.7 trillion yuan (US$204.7 billion) at the end of
September, with an NPL ratio of 13.37 percent, down 4.39 percentage
points from the start of the year.
(China Daily November 12, 2004)