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China's state-owned banks that are heavily burdened with bad loans need to go public as soon as possible, a top Chinese economist said yesterday in Beijing.
"The state-owned banks are in bad need of capital, and going public will help them gain healthy funding," Li Yining, professor and chief director of the Economics and Administration Department of Peking University said. Expressing his great eagerness to expedite the marketing process of these large, awkward banks, Li suggested the listing process could be divided into three steps.
The banks should first become multi-invested, which means they will never be wholly state-owned ones, with even foreign funds welcome. All the investors will fulfill limited duties and liabilities.
In the second phase, in the economist's opinion, the banks should transform into limited companies with several shareholders.
Finally, the new banks should plan initial public offerings and apply for a stock exchange listing.
According to Li, the move is imperative, because China's future access to the World Trade Organization will put the state-owned banks in an embarrassing situation as foreign banks flood in with ample funds and super service.
What's more, two years after any country's entry into the WTO, all the foreign commercial banks will be granted the right to extend loans to the enterprises of that country. Five years away, these banks will even be able to carry out local currency business. For example, in China, renminbi business will no longer be off-limits to overseas banks.
"If Chinese people opt to deposit money in foreign banks then, the overall business of the domestic banks could be greatly battered," Li foresees.
However, Li said it's still not too late for the state-owned banks to get prepared for that situation.
(Eastday.com 05/11/2001)
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