Date
24 September 2017
More than 70 percent of China's banking assets are controlled by the big five lenders. Industrial and Commercial Bank of China is the country's largest bank. Photo: Bloomberg
More than 70 percent of China's banking assets are controlled by the big five lenders. Industrial and Commercial Bank of China is the country's largest bank. Photo: Bloomberg

Academic urges reform of monolithic China banking system

China’s big five lenders control too much banking assets, resulting in an imbalanced development of the market, the Hong Kong Economic Journal reported Friday, citing a senior academic.

Also, half of banking profits go to just 20 listed lenders, according to Ou-Yang Hui, dean of the Cheung Kong Graduate School of Business.

Ou-Yang said Beijing should reform the banking sector to reduce the overconcentration of resources in a few players.   

More than 70 percent of assets in the system are in the hands of five lenders and about half of profits go to just 20 listed banks, he said.

Meanwhile, the ongoing liberalization of interest rates is posing a huge challenge.

However, Ou-Yang said it’s unlikely to cause bankruptcies as happened in the United States during the 1970s and 1980s when it liberalized interest rates.

China has a more conservative approach to profit and risk and more stringent banking regulations, he said.

More than 1,000 US banks collapsed when competition squeezed interest margins and led to deteriorating loan quality during the liberalization process.

The meltdown resulted in the global financial crisis of 2008, prompting government bailouts of certain commercial lenders.

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Freelance journalist

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