CBRC Offices Person in Charge Guangxi Office SU Baoxiang Hainan Office A Xiaoteng Chongqing Office HONG Peili(Ms) Sichuan office WANG Junguan Guizhou office WANG Yanxiu Yunnan office LIN Yongli Tibet office FU Minggao Shaanxi Office Gansu office XIE Ning Qinghai Office ENG Yunzhu(Ms) AN Ning Xinjiang office LAI Xiufu Dalian office Ningbo Office LING Gan Xiamen office MA Zhongfu Qingdao office CHE Shenzhen office XIONG Liangju Thanks to: Mr GAO Jun, former Director-General of CBRC Xinjiang Office, left in December 2010. Note: As of the day of 2010 Annual Report printing About the CBR
19 Guangxi Office SU Baoxiang Hainan Office JIA Xiaofeng Chongqing Office HONG Peili (Ms) Sichuan Office WANG Junquan Guizhou Office WANG Yanxiu Yunnan Office LIN Yongli Tibet Office FU Minggao Shaanxi Office LI Jianhua Gansu Office XIE Ning Qinghai Office LENG Yunzhu (Ms) Ningxia Office AN Ning Xinjiang Office LAI Xiufu Dalian Office YUAN Fei Ningbo Office LING Gan Xiamen Office MA Zhongfu Qingdao Office CHEN Yulin Shenzhen Office XIONG Liangjun CBRC Offices Person in Charge Thanks to: Mr. GAO Jun, former Director-General of CBRC Xinjiang Office, left in December 2010. Note: As of the day of 2010 Annual Report printing. About the CBRC
China Banking Regulatory Commission Annual Report 2010 Photograph by CBRC staff
20 Annual Report 2010 China Banking Regulatory Commission Annual Report 2010 Photograph by CBRC staff
Part One Economic& Banking Developments
21 Economic & Banking Developments Part One
中国餐行业监督管委员会 Annual Report 2010 L Macroeconomic and financial environment 1. Macroeconomic and financial European banking system was still tight, leading environment to heavy reliance on the European Central Bank ECB)for funding At In 2010. the dramatic turmoil from the lending to banks in crisis-stricken countries such nternational financial crisis gradually faded away. but the crisis was far from over. Though the as Ireland, Portugal and Spain were at historical world economy was widely perceived to be on highs. In addition, the eu and the U. S banks the track of gradual recovery, one after another projected to have USD1. 5 trillion of debts maturing political, economic and social event made the in 2011(source: FSB, January 2011). Given the gradual exit of government guarantees and central recovery path bumpy and volatile. The divergence bank liquidity support, as well as the scheduled was pronounced. In 2010, the globa/GDe homies between the developed and emerging ecc implementation of new international regulatory increased by 5 percent, with emerging markets standards, the re-financing pressures will continue to mount and developing countries contributing 7.1 percent and high-income countries 3 percent respectively The third was the continued quantitative easing (source: IMF, January 2011). In general, the global monetary policy of major economies along with the economic and financial developments displayed build-up of inflationary pressure and asset bubble three prominent feature in emerging markets. In 2010, the U.S. launched the second round of quantitative easing(QE2), The first was the lackluster growth of the the ECB and the bank of japan also continued developed economies and overhanging European sovereign debt crisis. The"recovery without job accommodative monetary policies and increase government bond purchases. As a result, glob growth"remained a distinctive feature of many developed economies. In December 2010, the U.S liquidity increased significantly. On the one hand global commodity prices became more volatile In unemployment rate stood at 9.4 percent, while that of the eu reached 10 percent. The relative the second half of 2010, the global copper price soared by 60 percent, crude oil by 40 percent global oversupply had not changed fundamentally and gold price reached a new high of USD1, 400 either. Manufacturing capacity utilization in per ounce by the years end. Frequent extreme developed countries stood below historical weather events and excess liquidity substantially averages. The panic caused by the eu debt crisis spread rapidly from countries with smaller GDps pushed up the global prices of agricultural products, including wheat, corn and soybe such as Greece, Ireland and portugal to countries On the other hand, emerging markets attra vith larger economic scales like Spain and italy substantial capital inflows in a short time due to The second was the vulnerability of the financial their relatively stable fundamentals and strong system and rising funding pressure for banks growth potential. In 2010, net private capit The spillovers of the EU sovereign debt crisis and flows to emerging economies were projected to financial system vulnerability began to emerge. As reach USD825 billion, up by over 40 percent fr of end-June 2010, the total consolidated foreig USD581 billion in 2009(source: lIE, November exposures of BIS reporting banks to Greece. 2010). Hence, emerging economies increasingly Ireland, Portugal and Spain stood at USD2, 281 faced imported inflationary pressure, with the CPls billion, with 77.5 percent held by European banks, of many emerging economies having far exceeded representing a market value of USD1, 770 billion the warning line of 5 percent. In December 2010, (source: BIS, December 2010). Liquidity of the CPls in India, Vietnam, Russia, Brazil, and Argentina
22 Annual Report 2010 I. Macroeconomic and financial environment 1. Macroeconomic and financial environment In 2010, the dramatic turmoil from the international financial crisis gradually faded away, but the crisis was far from over. Though the world economy was widely perceived to be on the track of gradual recovery, one after another political, economic and social event made the recovery path bumpy and volatile. The divergence between the developed and emerging economies was pronounced. In 2010, the global GDP increased by 5 percent, with emerging markets and developing countries contributing 7.1 percent and high-income countries 3 percent respectively (source: IMF, January 2011). In general, the global economic and financial developments displayed three prominent feature: The first was the lackluster growth of the developed economies and overhanging European sovereign debt crisis. The “recovery without job growth” remained a distinctive feature of many developed economies. In December 2010, the U.S. unemployment rate stood at 9.4 percent, while that of the EU reached 10 percent. The relative global oversupply had not changed fundamentally either. Manufacturing capacity utilization in developed countries stood below historical averages. The panic caused by the EU debt crisis spread rapidly from countries with smaller GDPs such as Greece, Ireland and Portugal to countries with larger economic scales like Spain and Italy. The second was the vulnerability of the financial system and rising funding pressure for banks. The spillovers of the EU sovereign debt crisis and financial system vulnerability began to emerge. As of end-June 2010, the total consolidated foreign exposures of BIS reporting banks to Greece, Ireland, Portugal and Spain stood at USD2,281 billion, with 77.5 percent held by European banks, representing a market value of USD1,770 billion (source: BIS, December 2010). Liquidity of the European banking system was still tight, leading to heavy reliance on the European Central Bank (source: ECB) for funding. At present, the ECB’s lending to banks in crisis-stricken countries such as Ireland, Portugal and Spain were at historical highs. In addition, the EU and the U.S. banks are projected to have USD1.5 trillion of debts maturing in 2011 (source: FSB, January 2011). Given the gradual exit of government guarantees and central bank liquidity support, as well as the scheduled implementation of new international regulatory standards, the re-financing pressures will continue to mount. The third was the continued quantitative easing monetary policy of major economies along with the build-up of inflationary pressure and asset bubbles in emerging markets. In 2010, the U.S. launched the second round of quantitative easing (QE2), the ECB and the Bank of Japan also continued accommodative monetary policies and increased government bond purchases. As a result, global liquidity increased significantly. On the one hand, global commodity prices became more volatile. In the second half of 2010, the global copper price soared by 60 percent, crude oil by 40 percent, and gold price reached a new high of USD1,400 per ounce by the year’s end. Frequent extreme weather events and excess liquidity substantially pushed up the global prices of agricultural products, including wheat, corn and soybeans. On the other hand, emerging markets attracted substantial capital inflows in a short time due to their relatively stable fundamentals and strong growth potential. In 2010, net private capital flows to emerging economies were projected to reach USD825 billion, up by over 40 percent from USD581 billion in 2009 (source: IIF, November 2010). Hence, emerging economies increasingly faced imported inflationary pressure, with the CPIs of many emerging economies having far exceeded the warning line of 5 percent. In December 2010, CPIs in India, Vietnam, Russia, Brazil, and Argentina Economic & Banking Developments
surged by 6.47-11.75 percent respectively percent year-on-year. Total fixed asset inves 2. Domestic economic and financial registered an increase of 23.8 percent year-on- developments year. Imports and exports maintained rapid growth, with total volume increasing by 34. 7 percent In 2010, it remained a challenging task in China to year-on-year and the trade surplus decreasing boost the domestic consumption as an important by 6. 4 percent year-on-year. Urban and rural per driving force behind economic growth. The rising capita income rose 7.8 percent and 10.9 percent protectionism in world trade along with the RMB respectively from one year ago, marking the first appreciation aggravated the problem of gloom time since 1998 that net income of rural residents external demand. The increasingly severe structural grew faster than that of urban residents overcapacity and growth model featuring intensive energy consumption and pollution underscored Industrial restructuring was further intensified the urgency of economic transformation and During the Eleventh Five-Year Plan period, the industrial restructuring as well. With imported obsolete capacity of some industries including iron flationary pressure edging up, the work to curb steel, coke, cement and paper making were inflation and maintain stable growth was placed eliminated by 50 percent; the emission reduction under harsh test. however thanks to the swift and target of sulfur dioxide was achieved one year resolute macro adjustment measures taken by the ahead of schedule, that of chemical oxygen entral government, the upward trend of soci demand( CoD)half a year ahead, and the reduction economic development has been reinforced with target of energy consumption per unit of GDP was endogenous forces driving the domestic economy completed on schedule continuously boosted Proactive fiscal policy was implemented and the In 2010, Chinas gdp grew by 10.3 percent on national income distribution was further optimized a year-on-year basis, the value added of large The fiscal and taxation reforms were proceeded with industrial companies increased by 15.7 percent a special focus on optimization of fiscal expenditure year-on-year, and CPI increased cumulatively by 3.3 structure On the money supply side a moderately percent. Despite the extreme weather conditions accommodative monetary policy was continued to and natural disasters, food output secured another maintain steady growth of the money supply. As increase for the past seven consecutive years a result, the broad money supply(M2) increased Retail sales of consumer products went up by 18 by 19.7 percent year-on-year, 8 percentage points percent year-on-year, with auto sales up by 34.8 lower than that of the previous year. Box 1: Targeted supervisory measures adopted by the Cbrc In 2010, against the backdrop of complex and volatile economic and financial situations, the CBrC strengthened the forward-looking regulatory approach featured by timely intervention in order to consolidate the progress in tackling 1. In light of the rapid credit growth since the second half of 2008 and the subsequent gradual turnaround of the domestic economy, the CBrC closely followed the macro economic adjustment by bringing the credit supply back to a normal pace. During the process, banking institutions were required to appropriately control the aggregate credit supply, mprove credit structure, and well manage the pace of credit extension. When assessing the non-performing loans(NPLs). the CBRC shifted the focus onto banks'risk management capability, the rationalization of banks' loan classification and exposure measurement. In addition, the banking institutions were required to appropriately classify their loans and set onomic&Banking Developments 2
23 surged by 6.47-11.75 percent respectively. 2. Domestic economic and financial developments In 2010, it remained a challenging task in China to boost the domestic consumption as an important driving force behind economic growth. The rising protectionism in world trade along with the RMB appreciation aggravated the problem of gloomy external demand. The increasingly severe structural overcapacity and growth model featuring intensive energy consumption and pollution underscored the urgency of economic transformation and industrial restructuring as well. With imported inflationary pressure edging up, the work to curb inflation and maintain stable growth was placed under harsh test. However, thanks to the swift and resolute macro adjustment measures taken by the central government, the upward trend of socioeconomic development has been reinforced with endogenous forces driving the domestic economy continuously boosted. In 2010, China’s GDP grew by 10.3 percent on a year-on-year basis, the value added of large industrial companies increased by 15.7 percent year-on-year, and CPI increased cumulatively by 3.3 percent. Despite the extreme weather conditions and natural disasters, food output secured another increase for the past seven consecutive years. Retail sales of consumer products went up by 18.3 percent year-on-year, with auto sales up by 34.8 percent year-on-year. Total fixed asset investment registered an increase of 23.8 percent year-onyear. Imports and exports maintained rapid growth, with total volume increasing by 34.7 percent year-on-year and the trade surplus decreasing by 6.4 percent year-on-year. Urban and rural per capita income rose 7.8 percent and 10.9 percent respectively from one year ago, marking the first time since 1998 that net income of rural residents grew faster than that of urban residents. Industrial restructuring was further intensified. During the Eleventh Five-Year Plan period, the obsolete capacity of some industries including iron & steel, coke, cement and paper making were eliminated by 50 percent; the emission reduction target of sulfur dioxide was achieved one year ahead of schedule, that of chemical oxygen demand (COD) half a year ahead, and the reduction target of energy consumption per unit of GDP was completed on schedule. Proactive fiscal policy was implemented and the national income distribution was further optimized. The fiscal and taxation reforms were proceeded with a special focus on optimization of fiscal expenditure structure. On the money supply side, a moderately accommodative monetary policy was continued to maintain steady growth of the money supply. As a result, the broad money supply (M2) increased by 19.7 percent year-on-year, 8 percentage points lower than that of the previous year. Box 1: Targeted supervisory measures adopted by the CBRC In 2010, against the backdrop of complex and volatile economic and financial situations, the CBRC strengthened the forward-looking regulatory approach featured by timely intervention in order to consolidate the progress in tackling global financial crisis and maintain the momentum of sound banking development. 1. In light of the rapid credit growth since the second half of 2008 and the subsequent gradual turnaround of the domestic economy, the CBRC closely followed the macro economic adjustment by bringing the credit supply back to a normal pace. During the process, banking institutions were required to appropriately control the aggregate credit supply, improve credit structure, and well manage the pace of credit extension. When assessing the non-performing loans (NPLs), the CBRC shifted the focus onto banks’ risk management capability, the rationalization of banks’ loan classification and exposure measurement. In addition, the banking institutions were required to appropriately classify their loans and set aside adequate provisioning for potential loss. Economic & Banking Developments