China to deepen reform of banking sector 03-11-2004 13:09

Chinese government has said it will further restructure the state-owned banking sector this year. The move comes ahead of full-scale competition from overseas rivals expected after 2006.

This was the message Thursday from China's top banking regulator Liu Mingkang. Liu outlined reform targets for two major state-owned banks, which are piloting the reform.

At a press conference this morning, the issue of reforming major state-owned banks was once again in the spotlight.

The Chairman of the China Banking Regulatory Commission, Liu Mingkang, said reform is necessary to prepare China's state-owned banking sector for fierce competition from overseas financial institutions. Liu highlighted the need for sound corporate governance, and stringent internal controls to ensure the banking system can operate safely and competitively.

The Chinese government is also planning overseas participation for the Bank of China and the China Construction Bank. This follows the injection of 45 billion US dollars from China's foreign exchange reserves into the two banks earlier this year.

Liu Minkang said, "These banks must establish sound corporate governance system under which shareholders can supervise the performance of management effectively. They should work to introduce outside strategic investors to change the current single state ownership and address management weakness. They should also adopt prudent lending and accounting practices and ensure transparent information disclosure."

Liu Mingkang also outlined major reform and performance targets for the two banks.

Between now and 2007, non performing asset ratios for the two banks should be maintained within a range of 3-5 percent. The return on equity should reach 11 percent by 2005 and top 13 percent in 2007 -- levels necessary to make the banks internationally competitive.

Also at the press conference, the Governor of the People's Bank of China, Zhou Xiaochuan, pledged to keep the value of the Renminbi stable. The remarks came as consumer prices are rising in China. Zhou said the central bank would continue to adjust money supply and exercise effective macro-control over the economy to prevent further inflation.


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