Page 314 - 2017 White Paper
P. 314
7 White Paper on the Business Environment in China
that by the end of that year, 74 foreign banks had set up in 2011 from a year earlier, outstripping the pace of profit
branches, and 186 others had established representative growth at local banks” (McMahon 2012).
offices (Luo 2008). By the end of 2008, these figures were
reported to have grown to 196 banks from 46 countries Nevertheless, foreign banks “are still niche players,
having established 237 representative offices (China.org. accounting for less than 2 percent of the banking sector’s
cn 2009) and 75 banks from 25 countries having opened total assets […] in part because foreign banks have been
116 branches (Xinhua 2009b). allowed to serve individual Chinese savers only since
2007, an opening that launched a wave of investment by
By June 2009, 26 foreign banks had fully incorporated the banks in branches and personnel” (McMahon 2012).
in China (Xinhua 2012b). A 2010 KPMG study indicated
that 37 foreign banks had incorporated on the Mainland In early 2006 a personal credit rating system was first
by the end of July that year (KPMG 2010). A study released established to be used as a standard assessment for
one year later by PwC saw the number of foreign banks consumer credit risk.
incorporated rise to 40 (Jacob, Yung, and Li 2011).
China’s consumers were reported to represent
Despite growth in the number of incorporations, approximately $2.5 trillion worth of household deposits
however, several challenges remain that are unique in 2008 (Jacob, Yung, and Leung 2009). The total assets
to foreign banks. An earlier PwC study in 2010 had of the banking industry furthermore grew by more
concluded that “[w]hile [foreign banks] have continued than 17 percent between 2003 and 2007 to reach $7.6
to be proactive in seeking out new opportunities, they trillion (Business Wire 2008). Profits by the industry were
remain challenged by policy constraints that dictate the reported as $41 billion in 2007 (Asia Pulse News 2008). In
pace, scope and direction of their market penetration… 2009, total banking assets on the mainland were reported
Meanwhile, the domestic banks continue to add to their to reach RMB 78 trillion (roughly $11.9 trillion) (KPMG
service offerings as they steadily evolve towards more 2010), although the proportion of those held by overseas
broadly based multi-service institutions… In contrast, lenders reportedly shrank from 1.84 to 1.71 percent even
the foreign banks are required to navigate a much as their total assets grew (Bloomberg 2010).
narrower space… Reasons for [foreign banks’] lack of
growth in market share included an un-level playing field, Having surveyed the challenges and opportunities,
economic factors and a limited product offering” (Jacob, foreign banks have predominately decided that their
Yung, and Leung 2010). future is bright in China, according to an Ernst & Young
survey of “38 overseas lenders”. “Gradual and successive
Nevertheless, “[a]gainst this challenging operating financial reforms” are fingered as an expected source
environment, the participants continue to believe of “modest improvement” over the next three years
strongly in the future opportunities of the Chinese (Bloomberg Businessweek 2014).
financial services market” (Jacob, Yung, and Leung 2010).
PwC’s follow up study reported that the 42 interviewed “Foreign lenders see a loosening of controls on
foreign banks collectively intended to expand their interest rates as the key to rebalancing China’s economy,
workforce in China by 53 percent by 2014, and that both even as the move may have a short-term effect on their
further reform and the future transition to a convertible profitability, the survey showed”, writes Bloomberg
Renminbi were causes for optimism in the Chinese Business Week. “The Communist Party, which pledged
financial services market’s future potential (Jacob, Yung in November to give markets a ‘decisive’ role in the
and Li 2011). economy, in July eliminated a floor on lending rates. It
has yet to remove a ceiling on deposit rates” (Bloomberg
As of 2011, the foreign banks collectively held 1.83 Businessweek 2014).
percent of the Mainland banking market (Jacob, Yung
and Li 2011). Although “in 2010, combined profit for the Insurance
foreign banks rose 24 percent, slower than China’s major
local banks [and in] 2009, most foreign banks saw their The insurance industry remains one of China’s least-
profits slide”, a KPMG report showed that the tables had penetrated by foreign firms, a fact which is by some
turned only a year later: “Combined net profit at the (but not all) attributed to particularly long approval
China operations of 33 foreign banks more than doubled
314
that by the end of that year, 74 foreign banks had set up in 2011 from a year earlier, outstripping the pace of profit
branches, and 186 others had established representative growth at local banks” (McMahon 2012).
offices (Luo 2008). By the end of 2008, these figures were
reported to have grown to 196 banks from 46 countries Nevertheless, foreign banks “are still niche players,
having established 237 representative offices (China.org. accounting for less than 2 percent of the banking sector’s
cn 2009) and 75 banks from 25 countries having opened total assets […] in part because foreign banks have been
116 branches (Xinhua 2009b). allowed to serve individual Chinese savers only since
2007, an opening that launched a wave of investment by
By June 2009, 26 foreign banks had fully incorporated the banks in branches and personnel” (McMahon 2012).
in China (Xinhua 2012b). A 2010 KPMG study indicated
that 37 foreign banks had incorporated on the Mainland In early 2006 a personal credit rating system was first
by the end of July that year (KPMG 2010). A study released established to be used as a standard assessment for
one year later by PwC saw the number of foreign banks consumer credit risk.
incorporated rise to 40 (Jacob, Yung, and Li 2011).
China’s consumers were reported to represent
Despite growth in the number of incorporations, approximately $2.5 trillion worth of household deposits
however, several challenges remain that are unique in 2008 (Jacob, Yung, and Leung 2009). The total assets
to foreign banks. An earlier PwC study in 2010 had of the banking industry furthermore grew by more
concluded that “[w]hile [foreign banks] have continued than 17 percent between 2003 and 2007 to reach $7.6
to be proactive in seeking out new opportunities, they trillion (Business Wire 2008). Profits by the industry were
remain challenged by policy constraints that dictate the reported as $41 billion in 2007 (Asia Pulse News 2008). In
pace, scope and direction of their market penetration… 2009, total banking assets on the mainland were reported
Meanwhile, the domestic banks continue to add to their to reach RMB 78 trillion (roughly $11.9 trillion) (KPMG
service offerings as they steadily evolve towards more 2010), although the proportion of those held by overseas
broadly based multi-service institutions… In contrast, lenders reportedly shrank from 1.84 to 1.71 percent even
the foreign banks are required to navigate a much as their total assets grew (Bloomberg 2010).
narrower space… Reasons for [foreign banks’] lack of
growth in market share included an un-level playing field, Having surveyed the challenges and opportunities,
economic factors and a limited product offering” (Jacob, foreign banks have predominately decided that their
Yung, and Leung 2010). future is bright in China, according to an Ernst & Young
survey of “38 overseas lenders”. “Gradual and successive
Nevertheless, “[a]gainst this challenging operating financial reforms” are fingered as an expected source
environment, the participants continue to believe of “modest improvement” over the next three years
strongly in the future opportunities of the Chinese (Bloomberg Businessweek 2014).
financial services market” (Jacob, Yung, and Leung 2010).
PwC’s follow up study reported that the 42 interviewed “Foreign lenders see a loosening of controls on
foreign banks collectively intended to expand their interest rates as the key to rebalancing China’s economy,
workforce in China by 53 percent by 2014, and that both even as the move may have a short-term effect on their
further reform and the future transition to a convertible profitability, the survey showed”, writes Bloomberg
Renminbi were causes for optimism in the Chinese Business Week. “The Communist Party, which pledged
financial services market’s future potential (Jacob, Yung in November to give markets a ‘decisive’ role in the
and Li 2011). economy, in July eliminated a floor on lending rates. It
has yet to remove a ceiling on deposit rates” (Bloomberg
As of 2011, the foreign banks collectively held 1.83 Businessweek 2014).
percent of the Mainland banking market (Jacob, Yung
and Li 2011). Although “in 2010, combined profit for the Insurance
foreign banks rose 24 percent, slower than China’s major
local banks [and in] 2009, most foreign banks saw their The insurance industry remains one of China’s least-
profits slide”, a KPMG report showed that the tables had penetrated by foreign firms, a fact which is by some
turned only a year later: “Combined net profit at the (but not all) attributed to particularly long approval
China operations of 33 foreign banks more than doubled
314
