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Reform and Development of Chinese Financial System


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Title: Reform and Development of Chinese Financial System

Reform and Development of Chinese Financial System
Zhang Jianhua Deputy General Manager of FIs.
Dept. BOC Head Office Co-Head of Preparatory Team
for BOC Brasil Project Porto Alegre 20th May 2008
A Universal Bank
Bnk of China (Brasil) S/A
Overview of Chinas Financial System
  • We will focus on
  • The banking system
  • And will also touch
  • financial markets

Part ? Reforms in the Chinese Banking System
  • Phase One (1978-1994)
  • In 1978, the People's Bank of China (PBC) a
    central bank, was created and became independent
    of the Ministry of Finance resulting in more
    effective conduct of monetary policy.
  • A two-tier banking system was created in which
    the PBC emerged
  • as the central bank, while the Bank of China
    (BOC), the China Construction
  • Bank (CCB), the Agricultural Bank of China (ABC)
    and the Industrial and
  • Commercial Bank of China (ICBC) emerged as the
    specialised banks.
  • In 1984, the PBC was specifically designated as
    the central bank of China.

Reforms in the Chinese Banking system
  • Other bank and Non-bank financial institutions
  • Regional banks (partially owned by local
  • city commercial banks (with business restricted
    to home city)
  • Cooperatives banks (Rural Credit Corp.,similar to
    credit unions in the U.S. and Urban Credit Corp.)
  • Non-bank financial intermediaries (such as the
    Trust and Investment Corporations finance
    companies, financial leasing companies, auto
    financing companies)

Reforms in the Chinese Banking system
  • Phase Two (1994-1998)
  • three policy banks were set up
  • the China Development Bank,
  • the Agricultural Development Bank of
    China and
  • the Export-Import Bank of China
  • To undertake the policy driven financing earlier
    assigned to
  • specialised banks.

Reforms in the Chinese Banking system
  • Phase Three (1998 onwards)
  • reform initiatives (as part of its WTO accession
  • 13 cities have been opened for foreign banks
    to conduct
  • renminbi business.
  • 100 eligible foreign banks were permitted to
    conduct renminbi
  • business and
  • 55 of them were allowed to provide renminbi
    services to the Chinese
  • enterprises.

Reforms in the Chinese Banking System
  • Allowed to provide 12 categories of services
    in China.
  • The permitted equity holding in Chinese
    financial institutions by
  • a single foreign investor has been
    raised from 15 per cent to 20
  • per cent, while the maximum foreign
    equity holding remains at 25
  • per cent.

Reforms in the Chinese Banking System
  • Financial Supervisory Bodies were set up
  • The China Securities Regulatory Commission (CSRC
    in end of 1992)
  • The China Insurance Regulatory Commission (CIRC
    in 1998)
  • The China Banking Regulatory Commission (CBRC in
  • A joint mechanism has been developed among the
    CBRC, the CSRC
  • and the CIRC for co-operation among themselves.
  • .

Reforms in the Chinese Banking System
  • corporate restructuring into shareholding banks
  • Two Pilot banks
  • The Bank of China and
  • the China Construction Bank
  • Followed by Industrial Commercial Bank of China
  • The government Capital injection from the
    official foreign exchange
  • reserves and non-performing loan writing-off
    aiming at building good
  • corporate governance.

Banking Sector in China
China Banking Regulatory Commission
Policy Banks (3)
Joint stock Commercial banks(10)
State-Controlled Commercial Banks(4)
Foreign Banks (225)
Regional Banks
Postal Saving Banks
City commercial banks
Co- operated banks
Non-bank financial companies
Industrial and Commercial bank of china
Bank Of china
China Construction bank
agricultural bank of china
  • The assets of the banking sector account for
    around 95 per cent of the total assets of all
    financial institutions in China.
  • 62 per cent of the fixed-asset investment in
    China are funded by banking Sector.
  • The big four SOE banks are the major players in
    the Chinese financial market, with their assets
    accounting for 52.7 per cent of the total bank
    assets in China.

Part ?Financial Markets
  • Two domestic stock exchanges
  • Shanghai Stock Exchange Market (SHSE)
  • Shengzhen Stock Exchange Market
  • At the end of 2005, the combined total market
    capitalization of the SHSE and SZSE
  • ranked 15th among the largest stock exchanges
    in the world
  • Bond Markets
  • The government bond ,policy financial bonds ,
    corporate bond
  • Private Equity/Venture Capital
  • In recent years the performance of the stock
    markets has been volatile.
  • This is somewhat surprising given the robust
    performance of the real
  • economy.

Part ? New Environment for the Development of
Chinas Financial Sector
  • In the mid-to-late stage of industrialization,
    financial institutions no longer need to fully
    perform policy financial functions

Constitution of GDP

New Environment for the Development of Chinas
Financial Sector
  • China's financial sector has entirely
    liberalized, financial institutions will face
    competitions from global extent

Part ?New Trend in the Development of Chinas
Financial Sector
  • On the macro side
  • interest rate and exchange rate liberalization
    has started

RMB/US Exchange Rate since Exchange rate
Mechanism Reforms
New Trend in the Development of Chinas Financial
  • On the micro side
  • The trend of transformation from divided
    operation to integrated operation has emerged.
  • CITIC Group established in 2002. It has now
    become an integrated financial holding group
    which is involved in banking, insurance,
    securities, fund and trust businesses. It
    comprises CITIC Industrial Bank, CITIC
    Securities, CITIC Funds, CITIC Trust Investment
    and Citic-Prudential Life Insurance Company.
  • BOC GroupBOC established BOCI (investment bank)
    and BOC insurance in HK to diversify its
    financial service business and to expand the
    business from HK to mainland
  • Ping An Insurance Group Ping An Insurance has
    also developed from a pure insurance company to a
    integrated financial group which offers various
    financial services including insurance,
    securities and trust.

Outlook of Chinas Financial Sector
  • The overall restructuring and potential listing
    of Agricultural Bank, and the commercialization
    reform of China Development Bank indicate that
    the policy functions of the state-controlled
    banks will be reduced, with commercial features
    being enhanced
  • Marked by the preparation of Shanghai Financial
    Futures Exchange, the rapid growth of fixed
    income product will promote both transformation
    of financial sector from indirect financing to
    direct financing and the interest rate
  • Take approved RMB bonds issuing in HK market as
    sign, the convertibility of RMB and
    liberalization of exchange rate mechanism have
    been further improved
  • Marked by the approval of fund management company
    established by commercial banks, financial
    institutions have started engaging in cross
    selling and integrated operation.

Chinas economy is experiencing the fastest
growth in the world, and is expected to maintain
a relatively high growth in a considerable long
period. With further implementation of financial
sector reforms and liberalization of the sector,
Chinas financial sector has the potential to
achieve the fastest growth in the global
Bank of China Global Services
May 2008
A Universal Bank
Bnk of China (Brasil) S/A
International Bank with Longest History in China
Became one of the Big Four banks in China
Pioneer of Innovation in the Banking Sector in
  • 1929 the first Chinese bank to open overseas
  • 1979 the first bank in China to provide export
    sellers credit
  • 1984 The first Chinese bank to issue bonds
  • 1986 BOC launched the first credit card service
    in China
  • 1991 BOC introduced the first telephone banking
    service in China
  • 1994 BOC became the unique Chinese bank to issue
    notes in Hong Kong and Macao.

Global Network
An extensive network11,608 branches and
subsidiaries worldwide
The first bank in China present in Asia, Europe,
Africa, Oceania, North America and South America
649 branches and Subsidiaries in 27 foreign
countries and regions including HKSAR and Macau
(No Transcript)
Credit Ratings
  • High credit ratings among the Chinese banks

  • Included in the Fortune Global 500 for 15
    consecutive years
  • Ranked 11th among the "Top 1000 World Banks" by
    the Banker in 2005
  • Awarded the "Best at Commercial Banking -- China"
    by Euromoney magazine for 2005
  • Awarded "Best Local Bank in China " by the Asset
    for 3 consecutive years
  • The Global Finance magazine of the US rated Bank
    of China the Best Trade Finance Bank in China,
    and also the Best Forex Bank in China

A Universal Bank
Bank of China (Brasil) S/A
New changes-a successful IPO in stock markets
  • Bank of China listed on Hong Kong Stock Exchange
    on June 1st, 2006, issuing 29,403,878,000 common
    stocks (H share) and financing about USD 11.2
    billion. It has been the fourth largest IPO in
    the history.
  • Bank of China listed also on Shanghai Stock
    Exchange on July 5th, 2006, issuing 6,493,506,000
    common stocks (A share) and financing about USD
    2.5 billion. It has been the largest public
    offering in the Chinese stock market.

Development Strategy Objectives
  • In 10 to 15 years, to become much stronger in
    financial strength, remarkably higher in
    profitability,to become a flagship among domestic
    commercial banks, and to match big international
    leading banks

Bright future
The Reform Procedure of Bank of China
  • Strengthen overall competitiveness, better
    effects of scale, and group synergy.

Quick Growth
  • IPO in 2006 June and July, providing a better
    capital structure

IPO As a Whole
Mid term
Long term
Short term
Major objectives
Listing as a whole
Group Competitiveness
1st Class International Bank
Universal Banking Strategy
Bank of China
Commercial Banking
Investment Banking
Life, property and casualty insurance.
Core Business of Investment Banking Public equity
issuance?MA Advisory, etc.
Corporate Banking Credit products, corporate
institutional clearing, settlement, fund custody,
treasury and global market services financing
products and services, financial solutions,
innovative and customized financial services
tailored to the needs of clients.
Brokerage and Institutional Sales Diversified
securitization, and other services to
institutional investors.
Financial Institutions Business International
settlement, treasury and financial markets,
deposits, domestic and foreign currency clearing,
fund custody, wealth management, banc assurance,
securities and futures settlement services, etc..
Fixed Income Syndicated lending, bond
underwriting, etc..
Fund Management Unit trust, etc.
Retail Banking Savings Deposit?Consumer
Loan?Credit Card etc..
Commercial Banking
Corporate Banking Business Bank of China
maintains its leading position in China for
foreign currency business and we also enjoy
Commercial Banking
Market leader in
international trade settlement business in China.

As of Dec 31, 2005
Commercial Banking
  • Retail Banking Business
  • Bank of China provides a wide variety of personal
    financing services including
  • - Savings Deposit Accounts
  • - Mortgage loans, car finance, personal
    consumer lending, etc.
  • - Credit Cards and Debit Cards
  • - Foreign Exchange and wealth management,
  • BOC is the largest domestic issuer of both
    renminbi and international credit cards with the
    largest merchant network in China.

Investment Banking
  • China Development Finance (HK) established 1979
  • BOCI established 1998, consolidating all
    investment banking businesses of the BOC Group
    under one roof
  • Operations in Hong Kong, London, Singapore,
    Beijing and Shanghai
  • One of the leading players in Hong Kongs capital
  • First international investment bank to enter the
    domestic A-share market in 2002

An integrated investment bank
Corporate Finance
Sales and Trading
Asset Management
Fixed Income
BOCI Chinas 1st InternationalInvestment Bank
  • Bank of China International (BOCI) has the
    strongest and most professional team of
    investment bankers, it also boasts of the biggest
    international distributions network, and has the
    biggest amount of assets under management among
    the domestic financial institutions.
  • Outstanding Performance
  • - in 2003Financemagazine awarded BOCI the
    Best Brokerage House in China and Hong Kong
  • - in 2004, BOCI was awarded by Emerging
    Marketas the Best Investment Bank in North
  • - Asia Moneyawarded BOCI awards for the Best
    Brokerage house in Greater China for 14 years

Insurance Business Development
  • BOC Insurance Ltd. was incorporated in Hong Kong,
    major focus being property insurance
  • In 2001, BOC Insurance established its Shenzhen
    branch, marking the beginning of its development
    in Mainland Chinas insurance market
  • In September 2004, with the approval of China
    Insurance Regulatory Commission,its Shenzhen
    branch was reorganized into its fully-owned

A Universal Bank
Bank of China (Brasil) S/A
Business Scope for Bank of China,( Brasil) S/A
  • Targeted Customers
  • Chinese Multinational Companies operating in
  • Chinese Companies are engaging in business with
    Brazilian counter-partners or vise versa
  • Overseas Chinese in Brazil
  • Business Scope (whole sale banking)
  • Mainly two business areas
  • Trade-related finance and services
  • Short-term working capital loan and
    syndicated loan

Contact Details At Present
  • Contact Person
  • Mr Zhang Jianhua Mobile in Sao Paulo 8776
  • Email address
  • Mr. Xiaoqi Email address
  • BOC Rep. Office Tel.(11) 3549 9958 Fax. (11)
    3549 9966
  • New Office Address Bank of China (Brasil) S/A
  • (The
    Santa Catarina Building )
  • Av.
    Paulista 287 - 4 Andar
  • SAO Paulo -
    Brasil   Zip Code 0311-000

  • Thank you
  • very much!
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