Banking in the People's Republic of China: Are New Tigers Supplanting Old Mammoths?
The weak state of the banking sector in the People's Republic of China is widely recognized. Much attention has been given to the poor performance of the four large state-owned banks that still dominate the sector. This paper focuses on a new generation of banks, the City Commercial banks, that are growing rapidly across the country. These banks have a major difference from the large state-owned banks: they may be owned in part by the state but they have a range of different shareholders. This, it is argued, creates a healthier form of corporate governance.
This study examines the performance of this new generation of banks drawing on an original survey of 20 banks commissioned by ADBI. It finds that the performance of these banks is stronger in the more affluent provinces and concludes that on a national basis it is unrealistic to expect that the spread of these banks alone will solve the country's serious banking problems. Hence reform of the four large state-owned banks must remain a priority.
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The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
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