Listed 'Big four' banks get new role, function
By Yi Xianrong (China Daily)Updated: 2006-11-21 11:03
The Industrial and Commercial Bank of China's (ICBC) simultaneous listings on
the Hong Kong and Shanghai stock exchanges in mid-October marked a new stage in
the reform of the country's four State-owned banks.
Before the ICBC, two
of the "big four" State-owned commercial banks, China Construction Bank (CCB)
and Bank of China (BOC), had already gone public. The fourth, Agricultural Bank
of China, will by now have gained adequate insight from the experiences of its
peers if it goes public in the future.
After their initial public
offerings (IPOs), the State-owned banks will see remarkable changes in their
functions, their business models and even their roles in the country's economic
development.
Before the State-owned banks can get on with their new
roles, they will face a series of problems, such as the salaries of high-ranking
managers after they go public, their roles in the government's macroeconomic
re-adjustment, and the problem of overheated investment driven by the loans
boom.
So what exactly is the function and role of these State-owned banks
after they go public?
Before the four State-owned banks began their reforms
to qualify for an IPO in 2003, their role was to pool financial resources across
society and allocate them to industries, sectors or enterprises.
In both
actions, they had to abide by government guidelines and fulfil their roles in
helping to re-adjust the economy.
At the end of 2003, the State-owned
banks began a financial restructure according to internationally accepted
financial standards.
To prepare for a market-oriented commercialization,
to qualify for an IPO and attract potential strategic investors, the State-owned
banks reined in credit, cut down non-performing loans and increased
capital.
But they are still the major power in the country's economy and
sit at the core of the economic cycle.
The real estate industry has
driven the latest round of economic growth. Investment in the sector and
individual house purchases have increased dramatically in a short
period.
The State-owned banks are behind this growth because of their
huge market share in individual house mortgages and long-term ties with property
developers.
The business operations of the State-owned banks have a
direct influence on the ups and downs of the country's banking credit as a
whole.
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