The Accounting and Financial Performance of Non-State-Owned Chinese Commercial Banks

Article excerpt

Abstract

This study investigates the development of non-state-owned commercial banks in China. This paper indicates that non-state-owned Chinese commercial banks have much better financial positions in terms of non-performing loan ratios and asset growth rate, compared with major state-owned commercial banks in China.

Keywords: Commercial Banks, China

1. INTRODUCTION

China has been transforming from a planned economy into a marketbased economy since 1992. Chinese banking sector is the most fastgrowing marketplace in the whole world. Billions of Chinese people would ask for more financial services when the living standards are improved dramatically since 1979. Although the state-owned commercial banks (SOCBs) are still the dominant players, non-stateowned Chinese commercial banks began to make big headways since the middle of 1980s.

Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), China Construction Bank (CCB), Agricultural Bank of China (ABC) and Bank of Communications (BOCOM) are 5 big state-owned commercial banks (SOCBs) in China. Based on the employee numbers, total assets, and the numbers of branches all across the nation, "big 5" controls a lame share of Chinese domestic banking market.

4 out of "big 5" are currently listed in the stock exchanges. The time table of initial public offering (IPO) is followed by - Bank of Communications (BOCOM) in June 2005, China Construction Bank (CCB) in October 2005, Bank of China (BOC) in May 2006, and Industrial and Commercial Bank of China (ICBC) in October 2006 (BankNet360.com, 2006). Now these 4 commercial banks become join-stock commercial banks in order to attract more capitals from the shareholders. But a majority ownership in these 4 commercial banks is still under the control of the government and its investment affiliates. So they are still state-owned banks. Agricultural Bank of China (ABC) is waiting for the IPO approval from the regulators since it has more operating problems.

In this paper, 12 commercial banks are defined as "non-state-owned commercial banks" in China. The list includes Hua Xia Bank, China Everbright Bank, China Minsheng Bank, China International Trust and Investment Corporation (CITIC) Bank, Industrial Bank in Fujian province, Guangdong Development Bank, Shenzhen Development Bank, China Merchants Bank, Evergrowing Bank based in Shandong province, Shanghai Pudong Development Bank, China Bohai Bank in Tianjing and China Zheshang Bank in Zhejiang province. These 12 commercial banks meet the following criteria. First of all, each of them has an approval from Chinese banking regulators to operate as the nationwide commercial banks. So they could do business all across the country and enjoy more flexibilities by opening branches and offices at any place in China. Second, they are the commercial banks that are not owned by the state government. These banks are also called non-state-owned joint- stock commercial banks in China (JSCBs).

So far, research work and other practitioners' studies are surprisingly limited about non-state-owned Chinese commercial banks. More research should have been done in this area to understand the business conditions and implications in these non-state-owned Chinese commercial banks.

Table 1 reports the general descriptions about these 12 non-state-owned joint-stock commercial banks, such as starting year, headquarter, listing place, stock ticker and some accounting information from 2006. The official name of Chinese currency is called Renminbi (RMB), which means peoples' money. Yuan (CNY) is used as one unit of currency. All reported accounting and financial numbers are quoted in 1 billion Chinese Yuan. All data in Table 1 is from the individual bank's website and annual report dated on December 31, 2006. Sohu business network, a primary Chinese web portal, and Yahoo finance China are used as the secondary alternative sources for confirming the accuracy and adding some missing information. …