Watch for big changes in the financial sector
By Sun Lijian (China Daily)Updated: 2007-02-09 09:47
The banks, even the entire banking system, would face instability in case of fluctuation in interest rates and exchange rates if the banks do not improve corporate governance and sharpen their competitive edge.
The People's Bank of China, the central bank, has taken a series of moves to aid the financial restructuring of the State-owned banks in an effort to get them listed on overseas stock markets, showing the government's determination to reform the banks.
At the conference, the authorities announced that the Agricultural Bank of China, the only one of the Big Four State-owned banks not publicly listed, would be restructured to strengthen its role as a financial service provider for farmers and county-level businesses. This is certainly a firm step in furthering the reform of the State-owned commercial banks as well as the financial sector.
Yet, challenges abound on the banks' way to higher competency. The most important one is to change their governance after they become publicly traded companies.
The central government has also realized the importance of providing better financial service in rural areas. The rural economy is troubled because the financial service suppliers cannot support its development.
The farmers are forced to turn to illegal loan-makers or even usurers to raise money. Such borrowing is both expensive and risky, which in turn cuts back farmers' profits.
The rural population sees a widening income gap with their urban
counterparts, weakening consumption capability and deteriorating living
standards. Farmers' lack of access to credit is one of the direct reasons for
the stagnant consumption level of much of the country and a threat to efforts to
build the harmonious society.
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