Page 326 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
2.10 Financial Sector
Background wider concepts, such as setting up channels to promote
and enable initial public offering applications from
By June 2017, banking regulators ordered lenders poorer areas (Yue).
to report on companies that have spearheaded
Chinese international expansion with hundreds of President Xi Jinping said in July 2017 that the central
billions of pounds of debt-fuelled acquisitions in recent bank would take a bigger role with a Financial Stability
years. Beijing and Hong Kong stocks linked to the and Development Committee to be set up under the
companies plunged as much as 10 percent as news of State Council. Beijing sees financial security as a vital
the probe spread. Yields on expansion bonds issued by part of national security and has been looking to crack
Chinese conglomerates. The China Banking Regulatory down on risky behavior in the financial markets, such as
Commission (CBRC) said it was interested in “systemic insurers selling high-risk products and companies taking
risks” to the financial system but did not comment on on excessive debt. The CBRC said in the statement on
its specific aims. Liu Zhiqing, Deputy Director General its website it would continue strengthening controls to
of the Prudential Regulation Bureau of the CBRC, said: avoid financial risks, including those related to liquidity,
“Some big companies are indeed the focus of our credit and shadow banking. It said there was a “step-
attention on systemic risks, because a big company has by-step” plan to reduce “chaos” in the market, without
big risk exposure for banks and they could transmit to giving details. The regulator will also boost cooperation
other companies.” Observers saw the CBRC’s moves as with other bodies, something Beijing sees as key to
the latest effort by the Chinese government to curb cutting risks. Regulators now oversee different parts
the frantic pace of outbound takeover activity. Capital of a complex financial sector, but no single watchdog
controls introduced in 2014 have been relaxed, but has a complete picture of the overall system. “CBRC will
authorities have signaled more scrutiny of the country’s resolutely follow the leadership of the Financial Stability
most enthusiastic dealmakers (Williams). and Development Committee, actively coordinate with
the People’s Bank of China to fulfill macro-prudential
At the National People’s Congress and the People’s management duties, and strengthen cooperation
Political Consultative Conference in early 2017, the with other financial regulators, ministries and local
State Council’s Premier, Li Keqiang, emphasized the governments,” it said (Jourdan).
role of large and medium-sized commercial banks in
promoting financial inclusion. To make financing truly Banking
accessible and affordable, he said, the government had
to enact supportive policies for these banks. As a result, With the macroeconomic environment stabilizing,
starting in April 2016, the Industrial and Commercial the profitability of China’s banking sector increased at
Bank of China (ICBC), the China Banking Corporation an accelerated pace in 2016, finds KPMG’s 11th annual
(CBC), and other banks have created divisions focused Mainland China Banking Survey. According to the
on financial inclusion. The government’s support is survey, the cumulative net profit of commercial banks
likely to be quite helpful. The CBRC’s effort to promote in Mainland China reached 1.6 trillion yuan in 2016,
agriculture financing, among other cases, has been an increase of 5.64 billion yuan, or 3.5 percent, over
regarded as a success. According to Jiao Jinpu, Former 2015. “Due to the regulatory requirements for capital
Chief Officer of the Central Bank’s Financial Consumer expansion and slower net profit growth, commercial
Protection Bureau, the level of financial inclusion in banks’ net profit grew at a slower pace than that of
China is already above the global average. With this capital. Therefore, the average asset profit ratio and
success has come expanded ambition: the government return on capital for commercial banks continued
now encourages not just greater financial access but to decline over the past three years,” says Edwina Li,
326
2.10 Financial Sector
Background wider concepts, such as setting up channels to promote
and enable initial public offering applications from
By June 2017, banking regulators ordered lenders poorer areas (Yue).
to report on companies that have spearheaded
Chinese international expansion with hundreds of President Xi Jinping said in July 2017 that the central
billions of pounds of debt-fuelled acquisitions in recent bank would take a bigger role with a Financial Stability
years. Beijing and Hong Kong stocks linked to the and Development Committee to be set up under the
companies plunged as much as 10 percent as news of State Council. Beijing sees financial security as a vital
the probe spread. Yields on expansion bonds issued by part of national security and has been looking to crack
Chinese conglomerates. The China Banking Regulatory down on risky behavior in the financial markets, such as
Commission (CBRC) said it was interested in “systemic insurers selling high-risk products and companies taking
risks” to the financial system but did not comment on on excessive debt. The CBRC said in the statement on
its specific aims. Liu Zhiqing, Deputy Director General its website it would continue strengthening controls to
of the Prudential Regulation Bureau of the CBRC, said: avoid financial risks, including those related to liquidity,
“Some big companies are indeed the focus of our credit and shadow banking. It said there was a “step-
attention on systemic risks, because a big company has by-step” plan to reduce “chaos” in the market, without
big risk exposure for banks and they could transmit to giving details. The regulator will also boost cooperation
other companies.” Observers saw the CBRC’s moves as with other bodies, something Beijing sees as key to
the latest effort by the Chinese government to curb cutting risks. Regulators now oversee different parts
the frantic pace of outbound takeover activity. Capital of a complex financial sector, but no single watchdog
controls introduced in 2014 have been relaxed, but has a complete picture of the overall system. “CBRC will
authorities have signaled more scrutiny of the country’s resolutely follow the leadership of the Financial Stability
most enthusiastic dealmakers (Williams). and Development Committee, actively coordinate with
the People’s Bank of China to fulfill macro-prudential
At the National People’s Congress and the People’s management duties, and strengthen cooperation
Political Consultative Conference in early 2017, the with other financial regulators, ministries and local
State Council’s Premier, Li Keqiang, emphasized the governments,” it said (Jourdan).
role of large and medium-sized commercial banks in
promoting financial inclusion. To make financing truly Banking
accessible and affordable, he said, the government had
to enact supportive policies for these banks. As a result, With the macroeconomic environment stabilizing,
starting in April 2016, the Industrial and Commercial the profitability of China’s banking sector increased at
Bank of China (ICBC), the China Banking Corporation an accelerated pace in 2016, finds KPMG’s 11th annual
(CBC), and other banks have created divisions focused Mainland China Banking Survey. According to the
on financial inclusion. The government’s support is survey, the cumulative net profit of commercial banks
likely to be quite helpful. The CBRC’s effort to promote in Mainland China reached 1.6 trillion yuan in 2016,
agriculture financing, among other cases, has been an increase of 5.64 billion yuan, or 3.5 percent, over
regarded as a success. According to Jiao Jinpu, Former 2015. “Due to the regulatory requirements for capital
Chief Officer of the Central Bank’s Financial Consumer expansion and slower net profit growth, commercial
Protection Bureau, the level of financial inclusion in banks’ net profit grew at a slower pace than that of
China is already above the global average. With this capital. Therefore, the average asset profit ratio and
success has come expanded ambition: the government return on capital for commercial banks continued
now encourages not just greater financial access but to decline over the past three years,” says Edwina Li,
326
