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Banking industry facing major problems
Updated: 2004-09-14 21:49

China's banking industry is facing four major problems with fierce competition of financial markets, according to a Chinese official.

Li Wei, Vice-Chairman of China Banking Regulatory Commission, made the remarks at the Chinese Business Summit 2004 on Monday.

"Business financing relies too much on bank loans, with highly concentrated risks," Li said. In the first half of this year, bank loans accounted for 83 per cent of the investment in non-financial sectors, government statistics show.

"In recent years, the negative impact of blind investment and low-level duplicated construction emerged," he said. "There are also increased risks for bank loans." Non-performing loan ratio is as high as 14.65 per cent, government figures show.

The major banks do not have effective management and the role of board of directors has not been fulfilled, he said.

State-owned banks focused on long-term loans to large cities and enterprises, while short-term loans and loans to small, medium- sized companies and small counties and villages were neglected in recent years, he said.

Reform is being carried out to address the above problems, he noted. A new banking system is being established in China, combining the state-owned commercial banks with banks of other forms, he added.

At the end of August, the total assets of various banks in China were 2.97 billion yuan (US$357.8 million), making up 90 per cent of capital of all financial sectors in China, official statistics show.

More than 62 foreign financial sectors and groups from 19 countries have established 199 financial branches in 21 cities and 152 foreign banks from 38 countries and regions have set up 216 offices in 22 cities, according to government figures.

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