APEC annual forum held in Shanghai
16/10/2003 16:36
The APEC Finance and Development Program 2003 Annual Forum in Shanghai
yesterday.
As briefed at the meeting, the Chinese government is banking
onthe strength of fiscal policies to promote the stable and healthy development
of the country's banking sector which is going through wide-ranging
reforms.
Given that the quality of assets of many domestic financial
institutions are still inferor, the Ministry of Finance is engaged in reforming
the bad debt provisioning and write-off practices in financial institutions,
said xu Fangming, director-general of the ministry's finance
department.
Xu said the government would gradually reduce business tax
rates for banks and adopt preferential tax and credit policies to facilitate the
reform of rural credit cooperatives.
"Obviously, some risk factors that
might have a negative impact on China's financial stability still exist, namely,
low capital adequacy ratio and high nonperforming loan ratio in state-owned
commercial banks," he said at forum.
The forum attracted around 100
financial executives from the APEC member economies to discuss the topic,
"Establishing Stable Financial System: Policy and Challenge."
"China's
big four state-owned banks have assumed a significant share of government
functions, resulting in high nonperforming loan ratio, low capital adequacy
ratio and poor corporate governance," said Xu, adding that it will endanger the
stability of China's financial industry if these problems cannot be
solved.
The average NPL ratio in the big four banks, namely the
Industrial and Commercial Bank of China, Bank of China, the Agricultural Bank of
China and China Construction Bank, stood at 22.19 percent at the end of June,
compared with an international standard of 15 percent.
The situation
could be even worse if there were no government intervention, however. The State
Council, China's cabinet, established four asset management companies in 1999 to
take over 1.4 trillion yuan (US$168 billion) worth of nonper-forming assets from
the four state-owned banks.
The central government issued special
treasury bonds worth 270 billion yuan to enhance the big four lenders' capital
base in 1998.
Jing Xuecheng, deputy director-general of the research
department of the People's Bank of china, said that the central bank is drawing
up an "Exit Strategy" which will force bankrupt commercial banks to leave the
market.
"Though the supervision task over the domestic banking industry
has been transferred to the China Banking Regulatory commission, the central
bank still guarantees a stable banking industry as one of its key objectives,"
said Jing.
China's banking industry has assets totaling 26.45 trillion
yuan at the end of 2002, representing 85 percent of the country's financial
assets, according to Tang Shuangning, vice chairman of the
CBRC.
Meanwhile, in a bid to build a sound macroeconomic environment for
domestic financial institutions to operate, China will continue to ensure the
stability of the renminbi's enchange rates, said Jing.
China has promised
to open its banking market to overseas investors by 2007, honoring its
membership in the World Trade Organization which it joined in December
2001.
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