China's State-owned Commercial Banks To Intermediary Business Competitive Strategy

The fierce competition on the domestic and international financial markets presents a challenge to the survival and development of state China's commercial banks. In what direction should the reform of China's state commercial banks go? Where are the areas of growth in tens of economic benefit? This thesis points out that the vigorous development of intermediary business, which is a way for China's state commercial banks to broaden business scope, increase revenue, and market share, is a realistic and inevitable solution.Intermediary business is "weapon" developed by commercial banks in western countries, in the way of economic, financial, and technological growth, to meet the socioeconomic needs for variety in credit intermediary, as well as the banks' needs for creating more business and revenue. Intermediary business has seen rapid development since the beginning of the 1990s and has been playing an increasingly important part in modern banking business in western countries. Compared with traditional banking business, intermediary business stands at an advantage in that it helps divert bank's exposure, improve the liquidity of capital, and bring profit for commercial banks. However, it also carries enormous risks.The development of the market economy, the increasingly fierce market competition and the need for commercial banks to raise their capital/hazardous asset ratio, gain a competitive edge in the international markets, improve their economic benefit and realize financial globalization all attest to the necessity for the development of intermediary business. Although some intermediary businesses have been conducted by China's commercial bank's they are limited in form, scope and profit. Irregular practices also exist in intermediary businesses and supervision of intermediary businesses has not been up to the international practice. All this is incompatible with the status of China's banks.China's commercial banks, especially fully-owned state commercial banks, which enjoy a high prestige that attract numerous customers, west-established networks that allow speedy interflow of information, and a high degree of computerization, are well positioned for developing intermediary business. But hindered by traditional ideas, improper institutional setup, and lack of qualified professionals, China's commercial bands are still experiencing substantial difficulties in developing intermediary business. The high exposure of some intermediary businesses, along with management and market immaturity, also limits the development of intermediary business. Moreover, laws and regulations related to intermediary business have not been set up. For broadening intermediary business scope, fitting market challenge, Commercial banks should first of all renew their point of the intermediary business and reconsider its positive effects. Moreover, commercial banks must make some arrangements that are helpful to improve the intermediary business, including management system organizational structure, marketing, financial innovation, and risk precaution.