China unveiled a package of policies to tackle the pressing challenges faced
by the financial sector at a top-level conference held over the weekend.
Among the key initiatives announced by Premier Wen Jiabao at the two-day
National Financial Work Conference which is held every five years were:
three policy banks, which are State-owned lenders that concentrate on meeting
the country's economic goals instead of profitability, will be commercialized,
starting with the China Development Bank. The other two are the China Export and
Import Bank and the Agricultural Development Bank of China.
Agricultural Bank of China (ABC) will be restructured. ABC is the only one of
the "Big-Four" State-owned banks not listed.
"ABC will strengthen its role as a financial service provider for farmers and
county-level businesses," Wen said, adding that the restructure would be across
the board and the bank's businesses would not be split.
The government will push for innovation in providing financial services for
rural areas and build a multi-tier rural financial structure.
The bond market will receive special attention in
development of the capital market with an emphasis on corporate bonds.
China's financial sector has witnessed great changes
since the first national financial work conference was held in 1997. The
following are major events that have taken place since.
1998: The Ministry of Finance issued 270
billion yuan ($34.6 billion) in special treasury bonds to recapitalize the
"Big Four" State-owned banks. In November, the China Insurance Regulatory
Commission was established.
1999: Four asset management companies were set
up to take over non-performing assets of the "Big Four".
2002: In November, the Qualified Foreign
Institutional Investor system was introduced.
2003: In April, the China Banking Regulatory
Commission was established. In September, Bank of China and China
Construction Bank were approved to experiment with share-holding
2004: In December, the insurance industry was
fully opened to foreign players.
2005: In July, the foreign exchange rate regime
2006: In December, the banking industry was
fully opened to foreign banks.
Managers of the country's huge foreign exchange reserves are encouraged to
"explore new means and extend channels" for the use of the money.
Wen admitted that "quite a number of problems exist... we must use forceful
means to solve them". He reiterated some constant themes of recent years for the
financial sector's development deepening reforms at State banks to enhance their
commercial viability, improve the financial markets' depth and sophistication
and beef up financial authorities' capability to fine-tune the economy with
Wen said the country will steadily advance the financial industry's further
opening and promote fair competition between Chinese and overseas institutions.
The financial work conference has been held twice before in 1997 and 2002 and
both led to substantial reforms.
(China Daily 01/22/2007 page1)