By Guo Tianyong (China Daily)
Updated: 2007-08-17 07:03

It has been reported that Central Huijin, the State-owned investment company, plans to inject $40 billion into the Agricultural Bank of China (ABC), the only one of the Big 4 State-owned commercial banks that remains unlisted, to initiate its reform.

Though a spokesperson from the China Banking Regulatory Commission (CBRC) denied such a decision had been made in an interview with Southern Daily last week, the long-awaited shareholding reform of the ABC has again aroused public attention.

In the opinion of this writer, the time is now right for the ABC to take the reform.

The ABC reported a 42.3-billion yuan ($5.6 billion) operating profit for the first half of the year, an increase of 64.55 percent on the same period last year, the bank said in a statement last Tuesday.

Its bad-loan ratio fell 2.09 percentage points from 23.43 percent at the end of last year. The excellent operating performance has created favorable conditions for the shareholding reform.

However, as the ABC will shoulder dual goals to maximize its profits as a commercial enterprise and serve the rural economy, its shareholding reform process will not be a smooth sailing.

The national financial work conference held early this year finalized the reform orientation for ABC in an effort to bolster the rural economy. Premier Wen Jiabao said the ABC reform must be carried out in a steady manner that would serve the financial demands of rural China. Thus the ABC undoubtedly has to face a much tougher task than the other State banks had to.

Xiang Junbo, the new president of the ABC, also made it clear that to combine commercial operations with the task of serving the rural economy is the most important thing to promote the bank's reform. He said it is the most difficult part and will decide whether the reform will succeed or not.

Certainly, under the premise of overall reform, the ABC will enhance its support for the construction of a socialist new countryside and there will be more and more rural branches of the ABC in the future.

Then, compared with other State banks, the ABC will have to face more operational links, which means greater difficulty in forming an effective enterprise management structure.

It should be realized that, after the shareholding reform, the ABC will be neither a policy bank that does not aim to make a profit, nor a credit cooperative institution focused on providing financial services to farmers; it will be a commercial bank in nature.

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