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Competition sharpens as China opens banking sector, experts

(Xinhua)
Updated: 2006-11-25 15:31

China's commercial banks have been warned that competition will sharpen after the country fully opens its banking sector to foreign-funded banks.

Foreign banks that previously targeted high-end customers would turn their attention to small and mid-sized enterprises, said Bank of China vice chairman Zhu Min.

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Meanwhile mainland domestic banks would seek out high-tier business, Zhu told "The China Conference: Financing--Harmonious Growth" in Beijing.

Discussion of China's future banking sector heated up after the release of regulations on November 16 allowing foreign-funded banks to conduct Renminbi business for Chinese citizens before December 11.

The government will encourage and guide foreign banks to set up incorporated banks registered in China, which will enjoy the benefits of the country's banking sector.

The government has taken measures to open financial markets, including the introduction of foreign strategic investors, which allowed the Industrial and Commercial Bank of China to invite Goldman Sachs, Allianz and American Express, said Dong Tiefeng, an official with the China Banking Regulatory Commission.

The non-performing loan ratios of major state-owned banks dropped to below five percent after going public, he said.

The reform's ultimate goal was to transform the banks into market players with efficient, modern corporate governance, he said.

Cao Yuanzheng, chief economist with Bank of China International, said Chinese banks should improve their capital structure and provide more diverse products. They should also pay more attention to business risks, especially in fields such as electronics and information resources sharing.