The reformation of the banking sector and the opening to the world economy steered China into enormous economic growth. The agricultural sector learned from foreign countries and became more efficient, foreign trade exploded, and foreign technologies were implemented rapidly with the support of foreign investments. From 1976 to 2020 China’s total GDP increased from $793.568 billion to $14.34 trillion. The GDP per capita grew from $853 to $8130 in 2020. China developed far faster than worldwide GDP.
Commercial banks in China only started to develop when the central governments changed the policy of tight control at the beginning of the 1990s. After 30 years without commercial banking China started to use foreign expertise (China imported textbooks, established business schools and trained their staff by foreign experts) to build the commercial banking sector in China.
With the establishment of the Bank of China in 1912, the modern Chinese banking system can be traced back to the late 19th century. In the 1950s and 1960s, however, the government nationalized all financial institutions and established the People’s Bank of China (PBOC) as the central bank, causing significant changes in the banking sector. China began implementing economic reforms in the late 1970s, and the banking sector underwent a significant transformation in the 1990s with the introduction of new financial products and the entry of foreign banks.
As of June 2021, the total assets of the Chinese banking sector were 337.7 trillion yuan (approximately $52.2 trillion), according to data from the People’s Bank of China. About half of the sector’s assets are held by four large state-owned banks: Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank of China (ABC), and Bank of China (BOC). In the first half of 2021, total assets will increase by 10.5%, continuing the sector’s rapid growth over the past few years.
The China Banking and Insurance Regulatory Commission (CBIRC) regulates the Chinese banking sector by overseeing the licensing and supervision of banks as well as the risk management of the banking system. In recent years, the CBIRC has taken measures to strengthen regulation, including imposing stricter capital requirements and cracking down on illegal fundraising activities.
As of 2021, China was home to more than 4,000 banks, including large state-owned banks, joint-stock commercial banks, city commercial banks, rural commercial banks, and foreign banks. The four state-owned banks mentioned earlier are the largest banks, accounting for approximately 40% of the sector’s assets.
Total Credit: According to PBOC data, the total credit extended by Chinese banks in June 2021 was 184.1 trillion yuan (approximately $28.3 trillion). This credit consists primarily of loans to businesses and individuals, with the remainder consisting of bonds and other debt instruments.
Overall, the Chinese banking sector is deemed to be relatively strong, with large state-owned banks holding a dominant market position. However, there are concerns regarding the high levels of debt held by Chinese companies and local governments, which could pose a future threat to the banking sector. The government has taken steps to mitigate these risks, including tightening shadow banking regulations and cracking down on illegal fund-raising activities. Additionally, fintech companies and online lenders offering new products and services to consumers and businesses are increasing competition in the sector.
Biggest commercial banks in China
There are many commercial banks in China, which are financial institutions that provide a wide range of banking and financial services to individuals, small businesses, and corporate customers. Some of the largest and most well-known commercial banks in China include:
- Industrial and Commercial Bank of China (ICBC): The largest bank in China by assets, and one of the largest banks in the world.
- China Construction Bank: The second-largest bank in China by assets.
- Agricultural Bank of China: The third-largest bank in China by assets.
- Bank of China: The fourth-largest bank in China by assets, and one of the oldest banks in the country.
- China Development Bank: A state-owned development finance institution that provides financial services to support economic and social development in China.
- China CITIC Bank: A large commercial bank in China, with a strong focus on retail banking.
- China Minsheng Banking Corporation: A mid-sized commercial bank in China, with a focus on serving small and medium-sized enterprises.
- China Guangfa Bank: A large commercial bank in China, with a strong presence in the retail banking sector.
- Ping An Bank: A large commercial bank in China that is known for its strong digital banking capabilities.
- China Pacific Insurance: A financial services company in China that offers a range of insurance products as well as banking and investment services.
Chinese banking sector explained
Between 2020 and 2012, the Chinese banking industry had substantial growth, partly as a result of expanding digital technology usage, the extension of banking services into rural regions, and regulatory actions meant to handle rising debt levels. The insurance industry continued to expand during this time, and lending activity remained healthy, which helped the sector as a whole prosper.
The China Banking and Insurance Regulatory Commission said that Chinese banks’ total assets hit $40 trillion in 2020, growing at a YoY pace of 7.3%. The ratio of non-performing loans (NPLs) stayed constant at about 1.9%. Online banking activity also increased dramatically as a result of the development of digital technology, with mobile banking transactions expected to exceed $40 trillion in 2020, an increase of 30% YoY.
Despite the sector’s expansion, there were certain difficulties and dangers. As an illustration, growing debt levels, especially in the corporate sector, remained a concern. Additionally, fintech firms’ growing rivalry for the banking market put established banking structures and revenue sources in danger.
The continued extension of banking services into rural regions and the rising acceptance of digital technology are projected to fuel further growth in the Chinese banking industry in the future. The regulatory environment, which includes policies targeted at lowering financial risks and fostering sector stability, is also anticipated to continue favorable.
Despite the sector’s expansion, there were certain difficulties and dangers. As an illustration, growing debt levels, especially in the corporate sector, remained a concern. Additionally, fintech firms’ growing rivalry for the banking market put established banking structures and revenue sources in danger.
The continued extension of banking services into rural regions and the rising acceptance of digital technology are projected to fuel further growth in the Chinese banking industry in the future. The regulatory environment, which includes policies targeted at lowering financial risks and fostering sector stability, is also anticipated to continue favorable.
Banking in China
The banking sector in China is a vital part of the country’s economy, with many banks operating in the country. Chinese banks offer a wide range of financial products and services to individuals, small businesses, and corporate customers, including checking and savings accounts, loans, mortgages, credit cards, and investment products.
The banking sector in China is regulated by the China Banking and Insurance Regulatory Commission (CBIRC), which is responsible for maintaining financial stability, supervising and regulating banks and other financial institutions, and implementing monetary and credit policies.
There are many challenges facing the banking sector in China, including a slowing economy, rising levels of debt, and increasing competition from non-bank financial institutions. However, the sector is also seeing opportunities for growth and innovation, particularly in areas such as digital banking and financial inclusion.
The banking sector in China is an important part of the country’s financial system and plays a significant role in the country’s economic development. As of 2021, the banking sector in China is made up of four major types of banks: commercial banks, policy banks, development banks, and foreign banks.
Commercial banks in China include state-owned banks, joint-stock commercial banks, city commercial banks, and rural commercial banks. These banks provide a range of financial services, including deposit-taking, lending, foreign exchange, and other financial services to businesses and individuals.
Policy banks in China are state-owned development finance institutions that provide financing for infrastructure and development projects. These banks include the China Development Bank and the Export-Import Bank of China.
Development banks in China are financial institutions that provide financing for infrastructure and development projects. These banks include the Agricultural Development Bank of China and the China Exim Bank.
Foreign banks in China are banks that are headquartered outside of China but operate branches or subsidiaries within the country. These banks provide a range of financial services to businesses and individuals in China.
Overall, the banking sector in China plays an important role in supporting economic growth and development in the country.
China’s banking sector, which includes commercial banks, investment banks, insurance firms, and other financial institutions, is referred to as banking in China. The Bank of China, the China Construction Bank, the Industrial and Commercial Bank of China, and the Agricultural Bank of China are the four state-owned commercial banks that dominate the country’s banking sector. According to total assets, these four banks are among the biggest in the world.
China also has a number of smaller commercial banks, as well as foreign banks that conduct business there, in addition to these state-owned institutions. The People’s Bank of China, China’s central bank, which is in charge of establishing monetary policy, oversees the country’s banking industry.
while also overseeing the banking system.
The Chinese government has put in place a number of initiatives to modernize and enhance the sector, and the country’s banking industry has seen significant development and reform in recent decades.
