By Ma Hongman (China Daily)
Updated: 2007-12-03 11:17

The best option for the "big four" under these circumstances would have been to refuse to participate in the new program, something not easily done. Therefore, they switched to the second best option, charging expensively, to defend their market monopoly.

The market response to the new program has proved that.

As mentioned above, most people think it too expensive to pay 1 percent for deposits, withdrawals or transfers. One of the respondents said the charge was even higher than what he would spend going to his bank's outlet by taxi. And most media reports observed there were few customers making use of the new options in the first week of its introduction.

It is well known that a market only prospers when demand and supply are both active. The higher-than-reasonable fees of the "big four" have not triggered public demand for the new services, making it impossible for the market to grow from the outset.

The high charge is, in fact, another way of the "big four" showing their reluctance to participate in the new program, and it has hindered the introduction of a better banking system.

It is, therefore, worthwhile for the authorities to consider how to improve current arrangements to achieve their original policy target.

The authorities were right to insist on the rule of the market economy and avoid intervening in the daily commercial decisions of banks. But it should also fully take into consideration the distortion of the financial market by the monopolies.

A pragmatic option is for the authorities to set the program's fees according to the real costs to banks. This would boost public interest.

The author holds a doctorate in economics from the Shanghai Academy of Social Sciences.

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