Research On The Development Strategy Of Small And Medium-sized Commercial Banks In China

Small and medium-sized banks, including joint-stock commercial bank, city commercialbank and rural commercial bank other than those state-owned large-sized commercial banks,have already become an essential part of China’s banking financial institutions. Thedevelopment and growth of small and medium-sized banks play an important role in enlargingthe service scope of the banking financial institutions, enhancing the local financial servicelevel, bringing along the development of other small and medium-sized financial institutionsand strengthening the overall service capability and reform performance of banking service inChina. At present, the world is in the post-financial crisis period, China’s economicdevelopment model is changing to endogenous economic development growth model, thosesmall and medium-sized banks are facing a totally new environment due to the facts that theeconomic growth becomes slowly and relies much on domestic demand; the unbalance ofregional economic development wakens and the middle class grows continuously; theurbanization is being accelerated and the features of technical innovation and green economybecome prominent; the reform on marketization of production elements is wholly moved onand the reform on marketization of interests is quickened up; the reverse cycle macroprudential supervision framework has been established and implemented and the developmenttrend and features of economics and financials are quite different from past historical periods.In the face of the economic and financial development trend and features and for the sake offitting in with the integral advancement of economic and financial reform measures, China’ssmall and medium-sized banks need to establish a new development strategy which hasdefinite goal, prominent features, clear path and appropriate focal points, so as to meet therequirements for the development of the small and medium-sized banks themselves, thedevelopment of regional economy and society and the development of the country, to realizethe transformation and development of small and medium-sized banks and to fulfill theirfunction of serving the economic society effectively.Taking the theory of strategies, optimal financial structure theory, and small andmedium-sized banks development theory as the theoretical basis, this thesis makes a systematical discussion and planning on the development strategies for small andmedium-sized banks in China by way of combining code analysis and empirical analysis. Onthe basis of stating clearly the value and meaning of the selected topic, clarifying the logicalstarting point and theoretical basis, sorting out the achievements, the existing problems andthe opportunities and challenges encountered by China’s small and medium-sized banks, theauthor creates a unbalanced panel data econometric model, identifies empirically and formsthe development factors system, creates the general framework for strategic development, anddefines relevant strategic targets, features and focal points for China’s small andmedium-sized banks. Centering on the general development strategies, the thesis analyzesdeeply the sub-strategies to assist and support the overall development strategy in seven fieldsincluding running of small and medium-sized banks in China, business development, businessprocess reengineering, risk management, IT management and information construction,human resource building, and regional financial ecological environment construction.Valuable conclusions are obtained from and supported by the theoretical and empiricalanalysis in this thesis.Firstly, the author brings forward the system of development factors for small andmedium-sized banks in China. By selecting12joint-stock banks,46city commercial banksand13rural commercial banks in2001-2010as the relevant data for studying China’s smalland medium-sized banks, the author creates a unbalanced panel data econometric model,identifies and forms the system of factors which affect development of small andmedium-sized banks, including running of small and medium-sized banks in China, businessdevelopment, internal management and risk management, human resource building, ITmanagement and information construction, business process reengineering, and regionalfinancial ecological environment construction.Secondly, the author creates a general framework for strategic development, and definingrelevant strategic targets, features and focal points for China’s small and medium-sized banks.The strategic targets are: to start with reform of running and management and improvement ofecological environment for development, push the small and medium-sized banks forward inthe direction of high efficiency, moderate and sustainable development actively, prudently andgradually, and build modern banks with distinct features and excellent service, so as to realizemultiple, differential and unique development with effective marketing competition, matchdynamically with the demands of economic society, and provide sufficient and harmoniousfinancial services to regional economy, small and medium-sized enterprises and urban andrural residents. The policy framework of the seven concerted aspects, including running ofsmall and medium-sized banks in China, business development, business process reengineering, risk management, IT management and information construction, humanresource building, and regional financial ecological environment construction, becomes thestrategic focal point and major pillar for development of small and medium-sized banks inChina.Thirdly, by analyzing the unique characteristics of being controlled by local governmentin corporate governance of small and medium-sized banks as well as the four kinds ofinfluencing factors such as the structural features of ternary classification, government control,supervision and governance, and market impact, the author creates the theoretical frameworkfor cost-effectiveness of corporate governance controlled by local government, describes theequilibrium state and development path for corporate governance, and forms the “three-steps”optimum path for progressive reform of corporate governance of small and medium-sizedbanks in China.Fourthly, by analyzing specifically the standardization and requirements of the4kinds ofmajor influencing factors (including efficiency attribute of scale economy and scope economyof enterprise in the growth stage, mutual promotion of taking root in local and cross-regionaloperations, market progression of interests, and financing predicament of small and microbusinesses) on business development of small and medium-sized banks in China, the paperputs forth the thinking and strategy of consolidating and expanding traditional business whilecreating and strengthening new business for business development of small and medium-sizedbanks.Fifthly, the paper points out that the impetus given by local government, the internalpulling force required by strategic planning, and the unanimity of awareness of the seniorexecutives make up the power source for supporting business process reengineering byanalyzing the theory, practices and actual conditions of business process reengineering. Thesmall and medium-sized banks shall carry out business process reengineering of businessstrategy module, match up the integration and optimization of organizational structure, andequip with supportive safeguarding measures on the principle of proceeding gradually inproper sequence.Sixthly, by analyzing the new requirements of aspects such as scientific development ofsmall and medium-sized banks, the connotative and intensive management mode, scaleexpansion, differential and specialized management, market planning, thecore-competitiveness of and supervision trend as well as the recently formed trend for riskmanagement of small and medium-sized banks, this paper establishes the framework andcontents of the risk preference system and mechanism building for small and medium-sizedbanks, forms a matching general strategy, compacts the foundation of traditional risk management, and establish gradually the thinking and strategy of comprehensive riskmanagement system whose core is risk capital constraint mechanism for risk management ofsmall and medium-sized banks.Seventhly, by establishing the partial equilibrium model which takes human capital riseand output increase as the basic structure and human resource building as the endogenousvariable, the paper analyzes the strategic logic and economic mechanism for human resourcebuilding of small and medium-sized banks in China, and reaches a conclusion that humanresource building of small and medium-sized banks can effectively enhance the human capital,reduce the income gap of employees and gain efficiency. The paper also makes it clear thatsmall and medium-sized banks need to coordinate in matching human capital strategy withother sub-strategies, to reform and form a modern market human capital building systemcovering post management, payment management, performance management, trainingmanagement and operation supervision management, to raise the asset specificity of humancapital, and to shape the core-competitiveness of human capital.Eighthly, the paper describes the focal points and measures to be taken for buildingecological environment for small and medium-sized banks in China by way of emphasizingthe administration of local government, pushing forward interest rate marketization and theconstruction of capital market step by step, and strengthening the building of financialinfrastructure which covers credit system, payment system, accounting and auditing, laws,supervision, deposit insurance, crisis and bankruptcy system.