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Banking in China PDF

321 Pages·2007·1.809 MB·English
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Banking in China Palgrave Macmillan Studies in Banking and Financial Institutions Series Editor: Professor Philip Molyneux The Palgrave Macmillan Studies in Banking and Financial Institutions is international in orientation and includes studies of banking within particular countries or regions, and studies of particular themes such as corporate Banking, Risk Management, Mergers and Acquisitions, etc. The books will be focused upon research and practice, and include up-to-date and innovative studies on contemporary topics in banking that will have global impact and influence. Titles include: Yener Altunbus, Blaise Gadanez and Alper Kara SYNDICATED LOANS A Hybrid of Relationship Lending and Publicly Traded Debt Santiago Carbó, Edward P. M. Gardener and Phillip Molyneux FINANCIAL EXCLUSION Franco Fiordelisi and Philip Molyneux THIRTY YEARS OF ISLAMIC BANKING History, Performance and Prospects Philip Molyneux and Munwar Iqbal BANKING AND FINANCIAL SYSTEMS IN THE ARAB WORLD Alfred Slager THE INTERNATIONALIZATION OF BANKS Patterns, Strategies and Performance Mario La Torre and Gianfranco A. Vento MICROFINANCE Franco Fiordelisi and Philip Molyneux SHAREHOLDER VALUE IN BANKING Banking in China Violaine Cousin © Violaine Cousin 2007 Softcover reprint of the hardcover 1st edition 2007 978-0-230-00695-9 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2007 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-349-28282-1 ISBN 978-0-230-59584-2 (eBook) DOI 10.1057/9780230595842 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 16 15 14 13 12 11 10 09 08 07 To Ewald, For all his patience and love. This page intentionally left blank Contents List of Tables xii List of Figures xv List of Abbreviations xvi Introduction xix Part I Setting the Stage 1 Structure of the Banking System 3 1.1 Historical developments 4 1.2 Organisation and structure of the banking landscape 5 Financial institutions 5 1.3 Key indicators of the Chinese banking system 8 Geographic scope 11 Banking performance rankings 12 1.4 Reform of the Chinese banking sector 13 Systemic risk 14 Allocation of resources and banking sector reform 14 Impetus for banking sector reform 15 Current reform focus 15 Part II Financial Infrastructure 2 Legal and Regulatory Environment 21 2.1 Regulatory authorities 21 People’s Bank of China 21 China Banking Regulatory Commission 23 Regulatory instruments 24 Regulators’ independence 26 Other regulatory agencies 27 2.2 Important commercial banking laws and regulations 27 Prudential indicators 31 2.3 Lending and deposit rates 32 2.4 Credit registries 34 2.5 Credit rating industry in China 35 vii viii Contents 3 Exit Mechanisms in Banking 39 3.1 Deposit insurance 39 3.2 Bankruptcy 41 Bankruptcy of enterprises 41 Proceedings for banks 42 Issues and constraints in current bankruptcy proceedings 44 4 Role of the State 46 4.1 Financial influence 46 4.2 Influence on decision-making 47 4.3 The role of the regulators 50 4.4 Rationale behind the influence of the state 51 5 Foreign Banks in China 53 5.1 Historical developments and rationale behind entry 53 5.2 Critics to the introduction of foreign shareholders 59 5.3 Foreign investors’ environment 60 Conclusion 63 Part III Specific Issues 6 Financial Intermediation 67 6.1 Definition and measurement 67 6.2 Financial intermediation and financial infrastructure 70 6.3 Enterprises financing 72 State-owned enterprises 73 Private and collective enterprises 74 Importance of banks in financing enterprises 76 6.4 Informal financial intermediation 77 7 Non-performing Loans 81 7.1 Estimating the level of NPLs 82 7.2 Classification standards of NPLs 83 7.3 Reasons for the emergence of NPLs 84 7.4 Resolving the NPL issues 86 7.5 New loan quality 89 7.6 NPLs and systemic risk 93 8 Capital Adequacy and Risk Management 96 8.1 Capital adequacy 96 8.2 New capital adequacy rules 98 Contents ix 8.3 Chinese regulations and international standards – A comparison 102 8.4 Current state of risk management systems in Chinese banks 103 9 Governance and Corruption 106 9.1 Corruption 106 9.2 Corporate governance 108 9.3 Corporate governance regulatory framework in China 111 9.4 Corporate governance in Chinese banks 113 9.5 State ownership and corporate governance 114 Conclusion 117 Part IV Analysis of Different Bank Types 10 State-Owned Commercial Banks 121 10.1 Key indicators and figures 121 10.2 Market share and position 121 10.3 Ownership and enterprise forms 121 10.4 Historical developments 123 10.5 Geographic and business scope 123 10.6 Management 124 10.7 Financial performance 125 10.8 Challenges and opportunities 125 11 Joint-Stock Commercial Banks 128 11.1 Key indicators and figures 128 11.2 Market share and position 128 11.3 Ownership and enterprise forms 130 11.4 Historical developments 130 11.5 Specific regulations and authorities 130 11.6 Geographic and business scope 131 11.7 Management 131 11.8 Financial performance 131 11.9 Challenges and opportunities 132 12 City Commercial Banks 135 12.1 Key indicators and figures 135 12.2 Market share and position 135 12.3 Ownership and enterprise forms 136 12.4 Historical developments 138

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