Key to reform financial system

China has an underdeveloped banking system with relatively low-quality service, but the system might be blamed most for its lack of small- and medium-sized banks (SMBs) and regional capital markets.

Even during the ongoing global financial crisis, the Chinese State-owned banks have recorded excellent performance. But their mighty power to make huge profits is due to their monopoly roles and lack of competition from the SMBs.

In sharp contrast with the figures of 7,500 commercial banks, 886 loan-deposit associations, 400 mutual saving banks and 9,900 credit unions in the US, China has only 18 main commercial banks and 110-odd city commercial banks.