Reflections Of Private Banks Development In China

With the deepening of China’s economic reform, the national economic system has changed deeply. The proportion of non-state economy has increased, self-employed business and private economy have developed rapidly. The distribution of national income and the subjects of investment and financing have changed fundamentally. Private economy has become an important force in promoting China’s economic growth.However, due to various factors, monopoly in financial sector has not been broken. The four major state commercial banks are still in the absolute monopoly position, when there are not so many small and medium size financial institutions, the market is unable to compete effectively, resulting in a financial resource allocated inefficiently, and numerous small and medium size private enterprises are facing difficulties in financing. Therefore, to promote the reform of the financial system, building a multi-levels and diversified modern financial organization system, including state-owned, joint-stock, private, local and cooperative, is the inevitable requirement of the current economic situation.In2011, a number of owners of small and medium size enterprises in Wenzhou ran away to hide themselves from paying back their debts from other people, which has caused strong concern in the whole country. The Wenzhou event brought out the problem of how to guide private capital in front of everyone. Lacking of adequate guidance and norm, China’s private capital has lingered in the gray area outside the formal financial system, and it’s likely to become the breeding groud of usurious loan, increase the broken risk of capital chain in SMEs, and even affect the healthy operation of our financial system and the stable development of the national economy.Therefore, how to guide and regulate the private capital is an important issue for the current financial system reform. This paper starts from the idea of guiding private capital to develop small and medium size financial institution, takes the development of private banks in Taizhou, Zhejiang Province, as the research object, and tries to put forward some thoughts on how to develop private banks in China.There has no unified view about how to define private bank in the theory circle. Integrated the views of many scholars, this paper define private bank as joint-stock commercial bank which is held by private capital, operated market-oriented, run by managers and the results be at the shareholders’own risk. All the discussion of this paper is based on this definition.In Taizhou, Zhejiang, private banks is developing prominently. Taizhou Bank, Tailong Bank and Mintai Bank not only come out on top on the financial business among all the local banks, but also own an excellent performance on operation. In addition, the three private banks make enormous contribution to SMEs. Success of private banks in Taizhou is resulted from developed private economy, plenty of private capital, and the strong support of the local government as well as perfect social credit environment. Although there are differences in the level of private economic development and credit environment between different areas, market position strategy, business idea and risk management of the three private banks in Taizhou is worthy of been learned. This paper suggests that the South of Jiangsu and the Pearl River region are ready for opening up to the access of private banks.