Home » Business » Biz Commentary
Are lenders a greedy monopoly? Opinions differ
April 6, 2012, Friday
|
Print Edition
Print Edition
EDITOR'S note:
China's Premier Wen Jiabao earlier this week said the government has agreed that the monopoly of major banks in China should be broken up and privately owned banks should be allowed to enter the sector. His remarks came amid public discussion about whether banks are making excessive profits and about how reform in the sector should proceed. Here are what commentators have to say on the issue.
Ma Guangyuan Economist and partner of Dacheng Law Office
Now is the best time to break up the banking monopoly. The profits for the five listed state-owned banks rose more than 20 percent in 2011. Their combined profits were 680.8 billion yuan (US$107.7 billion), accounting for more than 65 percent of profits at all commercial banks in China. Yet, small businesses, which make up 99 percent of total companies in China, are turning to private lending sources because they can't get loans from banks. The only way to this situation is to lower the threshold for entry into the banking industry and legalize private lending. Existing banks won't suffer a drop in margins. It will be more difficult to open up the financial sector after interest rates are deregulated. In that latter event, profits may drop.
Han Fulin Professor of Central University of Finance and Economics
I don't agree with Premier Wen that banks have a monopoly. Limits have been set on entry into the banking industry, but compared with the petroleum, electric grid and telecommunications sectors, there are far larger numbers of players in the banking industry. The truth that the largest 20 banks comprise about 80 percent of the market. That shows China's banking industry stands somewhere between monopoly and free competition. The huge profits banks are making mainly reflect interest-rate controls. Banks offer high rates for lending to companies due to market demand, but the deposit rates are set low by the government.
Yang Zaiping Vice president of China Banking Association
The profits of banks result from the gradual opening of the sector. The number of banks in China has grown to more than 3,800. It's a process of decentralization instead of monopolization. The well-being of banks reflects the well-being of economy. Three-quarters of the profits of state-owned banks are returned to government, and 45 percent of bank capital is replenished by profits. The growth of lending to small companies rose by 25 percent last year, far exceeding the 10 percent growth rate of loans in general. Introducing private ownership into the banking industry is an imperative and timely move. It's also not necessarily true that privately owned banks would do better than existing banks.
Chen Jiangang Analyst of Sinolink Securities
We think Premier Wen's remarks were a sign that the government aims to develop a multi-tier financial system that also involves private ownership. Banks and private lenders have their own advantages when it comes to serving small firms. Lending rates offered by banks are relatively low, but private lenders have closer knowledge of how a business is doing. Building a multi-tier financial system would better serve the economy.
China's Premier Wen Jiabao earlier this week said the government has agreed that the monopoly of major banks in China should be broken up and privately owned banks should be allowed to enter the sector. His remarks came amid public discussion about whether banks are making excessive profits and about how reform in the sector should proceed. Here are what commentators have to say on the issue.
Ma Guangyuan Economist and partner of Dacheng Law Office
Now is the best time to break up the banking monopoly. The profits for the five listed state-owned banks rose more than 20 percent in 2011. Their combined profits were 680.8 billion yuan (US$107.7 billion), accounting for more than 65 percent of profits at all commercial banks in China. Yet, small businesses, which make up 99 percent of total companies in China, are turning to private lending sources because they can't get loans from banks. The only way to this situation is to lower the threshold for entry into the banking industry and legalize private lending. Existing banks won't suffer a drop in margins. It will be more difficult to open up the financial sector after interest rates are deregulated. In that latter event, profits may drop.
Han Fulin Professor of Central University of Finance and Economics
I don't agree with Premier Wen that banks have a monopoly. Limits have been set on entry into the banking industry, but compared with the petroleum, electric grid and telecommunications sectors, there are far larger numbers of players in the banking industry. The truth that the largest 20 banks comprise about 80 percent of the market. That shows China's banking industry stands somewhere between monopoly and free competition. The huge profits banks are making mainly reflect interest-rate controls. Banks offer high rates for lending to companies due to market demand, but the deposit rates are set low by the government.
Yang Zaiping Vice president of China Banking Association
The profits of banks result from the gradual opening of the sector. The number of banks in China has grown to more than 3,800. It's a process of decentralization instead of monopolization. The well-being of banks reflects the well-being of economy. Three-quarters of the profits of state-owned banks are returned to government, and 45 percent of bank capital is replenished by profits. The growth of lending to small companies rose by 25 percent last year, far exceeding the 10 percent growth rate of loans in general. Introducing private ownership into the banking industry is an imperative and timely move. It's also not necessarily true that privately owned banks would do better than existing banks.
Chen Jiangang Analyst of Sinolink Securities
We think Premier Wen's remarks were a sign that the government aims to develop a multi-tier financial system that also involves private ownership. Banks and private lenders have their own advantages when it comes to serving small firms. Lending rates offered by banks are relatively low, but private lenders have closer knowledge of how a business is doing. Building a multi-tier financial system would better serve the economy.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
