Top banker: State banks to go public soon
Governor Zhou Xiaochuan of the People's Bank of China, or the country's central bank, revealed Monday that the planned share-offerings and listings of state-owned Bank of China (BOC) and China Construction Bank (CCB) are "not too far away".
The banks' stock market debuts should be decided by their boardof directors and depend on whether there are "windows of opportunity" on the capital market, he told a press conference during the annual session of the National People's Congress (NPC).
The banks were also consulting overseas and domestic investmentbanks, their financial advisers and accounting firms regarding thetiming, Zhou added.
Both the BOC and CCB have completed financial reshuffle and need to strengthen corporate governance and push on some internal reforms, he said.
The BOC and CCB, considered as financially healthier banks among China's Big Four that also include the Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC), are leading the government's latest, aggressive reform in the vital financial system.
They received a combined 45 billion US dollars in foreign exchange reserves at the end of 2003 from the central government aiming to bolster their balance sheets.
The bailout package has helped the BOC and CCB raise their capital adequacy ratios (CARs), being a measure of their available capital in proportion to their outstanding loans, to 8.62 and 11.95 percent, respectively, by the end of 2004.
The BOC's and CCB's non-performing loan (NPL) ratios plunged to5.12 and 3.7 percent, respectively, by the end of last year, according to a report delivered at the press conference.
The banks have both become joint-stock firms with a governance structure featured by a shareholders' meeting, board of directors,board of supervisors and senior management, which have all startedoperation.
The BOC has done away with all government ranks of its staff, urging its 230,000-strong employees to vie for new jobs in the bank.
A new company, the Central Huijin Investment Co., was inaugurated as major shareholders of the two banks to supervise their restructuring. It is managed by former department heads of the People's Bank of China with a board comprising representativesfrom the State Administration of Foreign Exchange, Ministry of Finance and the central bank.
On Monday, Zhou Xiaochuan also revealed reform of the other twobig state banks -- the ICBC and ABC -- "will also advance in a similar direction".
"We should say that joint-stock reform of the ICBC and ABC willbe carried forward on the back of progress and experience achievedon the BOC and CCB."
He gave no details about whether the state would also inject hefty funds into the ICBC and ABC. "Different banks will be given different policies," he said.
"Hot money" not much in China
Zhou said that there might be some speculative funds betting on the yuan appreciation, or the so-called "hot money" flowing into China, but the amount was "not big.
The reason is that China now still implements foreign exchange controls to some extent, he told the press conference.
China's forex reserve, which rocketed to 609.9 billion US dollars -- second only to Japan -- at the end of 2004, consist largely of trade surpluses, non-trade surpluses and capital investment from overseas, said Zhou, governor of the People's Bankof China.
As a matter of fact, the reserve started to surge not in 2004, but as early as 2002, on the backdrop of China's economic start-up following the Asian financial crisis, he said.
Forex reserve should be denominated in a number of currencies (instead of the US dollar alone) and comprise diversified products in a bid to award off risks, Zhou said in reply to a German reporter's question on whether China would hold more euro-denominated assets.
"We have long attached importance to the holding of a
certain amount of euro assets," the central banker said.
The unhealthy and destabilizing factors in the economy have been curbed -- but "not on a consolidated basis," he said.
"New problems are popping up as we are addressing the old ones," he said, pointing to investment in fixed assets last year, an indication of how much the government was spending on major infrastructure projects.
"Typically, the resurgence of investment boom is still possible.There were
150,000 new projects last year. In December alone, there were 20,000," he
Ma said, "Government intervention and the basic role of market in allocating resources should reinforce each other."
Economic growth patterns should be optimized, the minister added, citing that the country's gross domestic product (GDP) is now just one-eighth of that of the United States, but consumes half of the power electricity that the US does.
The newly installed capacity reached 50.55 million kilowatts last year, an annual record in the world. "The increase of electricity production capacity, however, still cannot catch up with the pace of demand growth," he said.
China began 2004 amid serious worries that the economy was dangerously overheated.
Inflation rose at an alarming rate, hitting a peak of 5.3 percent last July and August. Fixed asset investment hit ten-year highs in the January-March period, growing by 43 percent.
This prompted the central government to order energy-saving measures and tell local officials to cut spending on pointless prestige projects and unneeded factories, roads and other facilities.
A raft of market-based macro-control measures including the first bank interest rate hike in nearly a decade were taken beforered-hot investment growth was effectively curbed and the consumer price index, a key barometer of inflation, slowed sharply to 1.9 percent last January from an average 3.9 percent in 2004.
"We have avoided a roller-coaster in the economy," Ma said.