Sunday, February 13, 2005

An important year for Chinese banks

Chinese people always consider the first day after the Lunar new year as the beginning of the year. Most companies settle their accounts until the last day of the Lunar new year holiday and grant bonus to the employees as holiday presents. The same happens to the Chinese banks. They will have to progress their urgent plan for the new year when the employees come back from their holiday. The time for Chinese banks to develop themselves is limited because the limitation for foreign banks in geographic coverage, clients and licensing will be removed next year, five years after China's accession to the WTO.

The plans for the previous years have already been processing in a decent manner, like the privatization in the Bank of China and China Constuction Bank. Both are most likely the first two state-owned bank to go listed overseas this year. But the corruption scandals happened lately in the BOC made the managements so embarrassed that they refused to say more about the IPO, which possibly means that the two banks have already got the admission from the regulating authorities before the scandals could be aware of.

The other two state-owned bank, Industrial and Commercial Bank of China and Agricultural Bank of China, are curious to get up with the first two. ICBC will begin its privatization this year, though the details of the operation haven't been decided, according to Sina(Link in Chinese).
At the same time, Agricultural Bank of China has already handed in its second version plan to the authority, but may hardly get the approval in the short term.

The private banks are more aggressive in the IPO, aiming at attracting international investors as soon as possible. Two pioneers, the bank of Communications andChina Minsheng Banking Corp. Ltd, are planning to go listed in Hong Kong at the first half of the year.

City commercial banks don't want to fall behind in the IPO fashion this year, especiall the banks in the big cities. The Bank of Shanghai, who has introduced HSBC as its second biggest shareholder, is planning to go to the A share and H share market before the end of the year. Also, the Bank of Beijing planned to be invested by internatioal organizations this year. But to most of the city banks far away from the helm of politics, it is hard for them to reform themselves shortly because of the different policies in provincial government. Most of them are still in deep trouble, according to a previous story.

Fund management is considered as a new profitable business to many banks this year, besides the listing plans. According to Sina(Link in Chinese)'s report, the Industrial and Commercial Bank and the China Merchant Bank, are possibly the first two to get the license. But the problem is how to regulate the banks if they could both operate the fund and the other financial services. Will "fire walls" between different services be set up? If not, the fund management business could not be developed well with many possibly scandals.

The Chinese banks will surely be busy at their privatisation plan including IPO and fund management this year. But the internal management efficiency and productivity are also important to the bank reform. According to my personal experience, I once met a woman employee from a city branch of ISBC on a travel bus. I felt strange that she could freely travel on a working day. She said she could easily get leave from her company to do some private stuffs. I was surprised and then asked if her company had already faced serious competition. She sighed and said "We are state-owned, which has limited our advantage to compete with others".

Wow, what kind of advantage, then I wonder.

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