| After fifteen years of relentless effort, China was formally accepted by the World Trade Organization (WTO) on November 11, 2001. Entry to the WTO requires the opening-up of almost every industrial sector including the financial market. Since the birth of WTO in 1995, membership countries have conducted series of negotiations around financing rules and regulations. Now that we have become a member of WTO, it becomes inevitable that China should open her financial market, as required by the basic principles of GATS. Today, China's financial institutions have been challenged by foreign entities in both structure and management. The opportunity, however, is that their development can be greatly enhanced through participation in international competition and cooperation. Therefore, China's entry to the WTO connotes both challenge and opportunity to the domestic banking institutions. By the end of year 2003, China's financial institutions include 4 state-owned commercial banks, 3 policy banks, 11 shareholding commercial banks, 4 asset management companies, 11 city commercial banks, 182 foreign financial institutions, 209 foreign banks' deputies, 731 urban credit co-operatives, 35544 rural credit co-operatives, 3 rural commercial banks, 52 investment and trust companies, 74 financial companies, 12 financial releasing companies and numerous rural credit co-operatives. They can be roughed divided into four categories: state-owned commercial banks, other commercial banks, urban commercial banks, and the central banks. Other commercial banks refers to shareholding commercial banks. Urban commercial banks are evolved from former urban credit co-operatives that provided basic banking services. Among these four basic types of financial institutions, other commercial banks have few historical burdens; city commercial banks account for a small portion of total banking assets; central banks are currently restricted to the reform of auditing scopes and procedures. Therefore, the state-owned commercial banks are the focus of attention in China's banking system. They possess dominating percentage of deposits, commercial lending, and assume irreplaceable responsibilities for economic development and social stability. The four state-owned commercial banks account for 60% of the assets of the banking sector. They also claim 70% of the lending to state-owned enterprises and 70% of the financing to large-scope state development projects. Currently, our banking institutions are inferior to foreign banks in six major ways: 1) lack of profitability; 2) insufficient capital investment and inadequate risk management; 3) lower quality of assets; 4) excessive labor, duplicated structure, poor service, and high percentage of non-profit-generating-capital due to system flaws; and 5) lack of banking regulations.Therefore, strong competition from abroad has put China's banking sector under great pressure – a direct result from the country's entry to the WTO. To survive and eventually win out, this industry needs to develop a clear vision of the changing circumstances, implement effective strategies to cope with those challenges, and eventually sharpen its edges during the course of competition. At least six types of challenges can be expected for now: 1) Range of banking services – while most of the western banks merge the deposit, investment, insurance and credit functions, our domestic banks insist on the separation of bank, trust, and insurance; 2) Self management; 3) The war for talents; 4) Competition in financial means and creations; 5) Monitoring on banks and other financial institutions; and 6) The immature financial market. On the reverse side, becoming part of the world economy broadens the playground for our commercial banks and provides valuable opportunities for them to explore: 1) From the macroeconomic point of view, it improves the business environment where banks operate and increases the demand for financial services; 2) It provides opportunities to bring China's banking businesses abroad; 3)...
|
PDF Full Text Request