was already completed)countrywide was 6.5761 and enhance their overall health and capacity for million yuan. Total paid-in capital was 214.94 billion ustainable development, the CBrC encourages rural yuan, accounting for 6. 2 percent of the total assets of commercial banks to be publicly listed. Chongqing Rural 1 trillion yuan held by all financial institutions in Commercial Bank went public on the Stock Exchange the banking industry. s of Hong Kong in December 2010, becoming the first rural financial institution in China with its shares held Since 2009, rural credit cooperatives that intended to by the public and attracting interest in the reform and organize and establish as rural banking institutions development of rural financial institutions across China. 27 ave all chosen to reform as rural commercial banks This reformation is a significant change for rural credit Reform efforts are uneven across regions. Progress in cooperatives. Rural commercial banks develop more economically developed areas and those in the remote quickly because of clear ownership rights, standardized regions of central and west China are highly divergent, systems, relatively advanced philosophies and more resulting in a"dualization"where certain agricultural favorable positioning. The reform of ownership rights has regions have readily accessible financial services and contributed to growth in assets, capital, and revenues others do not. In addition, operations risk is significant for of small and medium rural financial institutions as well organizations converting from rural credit cooperatives reduced non-performing loans ratio. At the same to rural banking institutions due to a relatively large time, rural financial institutions in various regions have gap in development. For example, at the end of 2009 accelerated their expansion plans to open branches the balance of non-performing loans of rural credit in other regions, launch holding village and township cooperatives in Jiangsu Province was 10.973 billion banks, and make investments for share purchases in other yuan, or 59. 3 percent of total non-performing loans of regions. The Rural Commercial Bank of Zhangjiagang the rural cooperative institutions in the province. The opened three branches in other regions, and took non-performing loan ratio was 7.46 percent, which the lead in opening two village and township banks exceeded that of rural commercal banks and that of rural Each of these efforts has seen tremendous growth in cooperative banks by 5.71 and 3. 23 percentage points, business operations. The Chongqing Rural Commercial respectively. The capital adequacy ratio was 7. 2 percen Rural Credit Cooperative Bank plans to establish branches in seven provinces and which was lower than that of rural commercial banks municipalities, including Sichuan and Shaanxi Provinces, and rural cooperative banks by 5.34 and 3.05 percentage ecision Not Yet M within the next four years. 26 In addition to the Rural points, respectively. 28 Rural credit cooperatives also face Commercial Bank, many institutions opened village and additional challenges. Regional limitations still exist, and township banks, Indluding Beijing Rural Commercial there is no cross-operation and competition among rural Bank, Shanghai Rural Commerdial Bank, Changshu Rural credit cooperatives. In this round of reform, two critical Commercial Bank and Chongqing Rural Commercial Bank. pieces for broader service still need to be addressed, com/news/detailA specifically interest rate liberalization and the promot More institutions are choosing to acquire assets to competition among rural credit cooperatives meet expansion goals. In 2009, Ningbo Yinzhou Rural Cooperative Bank acquired about 20 percent Looking forward to 2012, we believe that the 21st Century Economic erald,May10,2010,http:/l of the equity of Qinhuangdao Commercial Bank. The government and regulatory authorities will continue acquisition was the first time a rural institution acquired to encourage and reinforce the rural-related services cel10003FM. htm equity in an urban commercial bank. In addition, to of financial institutions In addition to the efforts of promote the development of rural financial institutions rural financial institutions, commercial banks will also China Banking Regulatory accelerate the construction of rural financial service outlets and channels. All financial institutions will actively respond to requirements of the Cbrc by expanding their efforts to make rural-related key credit investments 01216206027PAE500253 BOH. html in areas such as water conservation, grain production drought resistance and disaster alleviation. At the same eform af time, the steps of shareholding system reform for rural financial institutions will accelerate, the rural banking system will be gradually established and refined, and the Century Economic Herald, overallfunctionsandcompetitivecompetenciesofruralMay10,2010,http://www financial services will both be significantly raised. cs.com.cnlyh/04/201005/ t201005102424040htm. 2012 China Banking Industry Top Ten Trends and Outlook--Enhancing Capital Management, Meeting New Challenges
2012 China Banking Industry Top Ten Trends and Outlook—Enhancing Capital Management, Meeting New Challenges 9 was already completed) countrywide was 6.5761 million yuan. Total paid-in capital was 214.94 billion yuan, accounting for 6.2 percent of the total assets of 105.6691 trillion yuan held by all financial institutions in the banking industry.25 Since 2009, rural credit cooperatives that intended to organize and establish as rural banking institutions have all chosen to reform as rural commercial banks. This reformation is a significant change for rural credit cooperatives. Rural commercial banks develop more quickly because of clear ownership rights, standardized systems, relatively advanced philosophies and more favorable positioning. The reform of ownership rights has contributed to growth in assets, capital, and revenues of small and medium rural financial institutions as well as reduced non-performing loans ratio. At the same time, rural financial institutions in various regions have accelerated their expansion plans to open branches in other regions, launch holding village and township banks, and make investments for share purchases in other regions. The Rural Commercial Bank of Zhangjiagang opened three branches in other regions, and took the lead in opening two village and township banks. Each of these efforts has seen tremendous growth in business operations. The Chongqing Rural Commercial Bank plans to establish branches in seven provinces and municipalities, including Sichuan and Shaanxi Provinces, within the next four years.26 In addition to the Rural Commercial Bank, many institutions opened village and township banks, Including Beijing Rural Commercial Bank, Shanghai Rural Commercial Bank, Changshu Rural Commercial Bank and Chongqing Rural Commercial Bank. More institutions are choosing to acquire assets to meet expansion goals. In 2009, Ningbo Yinzhou Rural Cooperative Bank acquired about 20 percent of the equity of Qinhuangdao Commercial Bank. The acquisition was the first time a rural institution acquired equity in an urban commercial bank. In addition, to promote the development of rural financial institutions and enhance their overall health and capacity for sustainable development, the CBRC encourages rural commercial banks to be publicly listed. Chongqing Rural Commercial Bank went public on the Stock Exchange of Hong Kong in December 2010, becoming the first rural financial institution in China with its shares held by the public and attracting interest in the reform and development of rural financial institutions across China.27 Reform efforts are uneven across regions. Progress in economically developed areas and those in the remote regions of central and west China are highly divergent, resulting in a “dualization” where certain agricultural regions have readily accessible financial services and others do not. In addition, operations risk is significant for organizations converting from rural credit cooperatives to rural banking institutions due to a relatively large gap in development. For example, at the end of 2009, the balance of non-performing loans of rural credit cooperatives in Jiangsu Province was 10.973 billion yuan, or 59.3 percent of total non-performing loans of the rural cooperative institutions in the province. The non-performing loan ratio was 7.46 percent, which exceeded that of rural commercial banks and that of rural cooperative banks by 5.71 and 3.23 percentage points, respectively. The capital adequacy ratio was 7.2 percent, which was lower than that of rural commercial banks and rural cooperative banks by 5.34 and 3.05 percentage points, respectively.28 Rural credit cooperatives also face additional challenges. Regional limitations still exist, and there is no cross-operation and competition among rural credit cooperatives. In this round of reform, two critical pieces for broader service still need to be addressed, specifically interest rate liberalization and the promotion of competition among rural credit cooperatives. Looking forward to 2012, we believe that the government and regulatory authorities will continue to encourage and reinforce the rural-related services of financial institutions. In addition to the efforts of rural financial institutions, commercial banks will also accelerate the construction of rural financial service outlets and channels. All financial institutions will actively respond to requirements of the CBRC by expanding their efforts to make rural-related key credit investments in areas such as water conservation, grain production, drought resistance and disaster alleviation. At the same time, the steps of shareholding system reform for rural financial institutions will accelerate, the rural banking system will be gradually established and refined, and the overall functions and competitive competencies of rural financial services will both be significantly raised. 25 Rural Credit Cooperative Reform Has Entered the Most Challenging Stage— Decision Not Yet Made as to Retaining or Abandoning the Mode of Provincial-level Rural Credit Unions, Direct Access for Agriculture, Farmers and Villages, November 21, 2011 http://info.china. alibaba.com/news/detail/v0- d1021627385.html. 26 Rural Credit Cooperatives “Advance or Retreat”, 21st Century Economic Herald, May 10, 2010, http:// nf.nfdaily.cn/epaper/21cn/ content/20100510/ArticelJ10003FM.htm. 27 China Banking Regulatory Commission: Continue to Promote Public Listing of Rural Commercial Banks, Xinhuanet, December 16, 2010, http://money.163com/ 10/1216/20/6O27PAE500253 B0H.html. 28 Restart of Rural Financial Reform after a Seven-Year Round of Efforts, In-depth Thinking Provoked by Unbalanced Development, 21st Century Economic Herald, May 10, 2010,http://www. cs.com.cn/yh/04/201005/ t20100510_2424040.htm
V. Chinese banks are focusing on efforts to expand their international footprint With gradual global economic integration and China's Africa and Oceania, and acquired or purchased shares fforts to reform and open markets, Chinas banking from 10 overseas institutions: 6 joint-stock commercial industry is gradually accelerating efforts to expand banks established 5 branch banks and 5 representative internationally. By establishing new institutions, merging offices overseas: and 2 urban commercial banks and acquiring institutions and relying on partners, established 2 representative offices overseas. Within 20 many banks are expanding their scope of business and days after November 8, 2011, Bank of Communications enhancing their cross-border business capacity. Generally alone had 3 overseas branch banks or subsidiary bank speaking, internationalized operations conducted by open for business. Chinese banks still lag behind the operational capacity of other global multi-national banks. In the post-crisis era, In 2010, the total assets of the overseas offices of the where global expansion, information sharing and market Industrial and Commercial Bank of China reached 75 orientation is progressing, the banking industry's efforts trillion U.S. dollars, and had grown by 45.1 percent to"go out"have become the intrinsic requirements for compared with the same period the previous year. promoting national economic development strategy Total pre-tax profits equaled 1 trillion U.S. dollars, and participation in international financial cooperation and had grown by 37. 2 percent compared with the same competition, and the acceleration of bank operation period the previous year. By 2010, the total assets of he overseas branch banks of Bank of communications reached 34.7 billion The globalization of Chinese banks is starting to percent compared to the beginning of the year. Realized place(see Figure 4). As of the end of 2010, five large operating profits totaled 335 million U.S. dollars, and commercial banks established a total of 89 primary had grown by 30.1 percent year over year operating institutions in Asia, Europe, the Americas, Figure 4. Major Overseas Merger and Acquisitions of Chinese Banks in Recent Years Bank of china China Construction bank Acquired 100% of equity in Singapore Aircraft Leasing Acquired 100% of equity in the wholly-owned Enterprise for 965 million U.S. dollars in December 2006 Asia subsidiary of Bank of America for 9.7 Bank of China(Hong Kong)acquired 4.94% of equity billion Hong Kong dollars in 2006 in Bank of East Asia(Hong Kong) for 3.95 billion Hong Acquired 100% of equity in AIG affiliate AIG Kong dollars in November 2007 Finance(Hong Kong)for 70 million Hong Kong Acquired 70% of equity in the Bank of East Asia dollars in August 2009 (Canada) for 72 million U.S. dollars in June 2009 China Minsheng Bank Industrial and Commercial Bank of china Acquired 5.2% of equity in UCBH Holdings Inc. Purchased 90% of equity in Bank Halim of Indonesia in for 92 million U.S. dollars in October 2007 2006 Acquired 80% of equity in Seng Heng Bank of Macau China Development Bank for 583 million u.s. dollars in 2007 Acquired 3. 1% of equity in Barclays Bank of the nber10,2011,http∥ Acquired 20% of equity in Standard Bank of South UK for 2.2 billion euros in August 2007 w.chinadaily. com. cn/ Africa for 36.67 billion South africa rand in october qcizgij2011-11-10/con- 2007 ent 4322977htm China merchants Bank Acquired 97.79% of equity in ACL Bank of Thailand for 3o Industrial and commercial Acquired Wing Lung Bank of Hong Kong as Bank of china and Bank of 17.71 billion Thai Baht in September 2009 its wholly owned subsidiary for over 30 billion Acquired 100% of equity in Fortis Securities of the U Hong Kong dollars from 2008 to 2009 in October 2010 Acquired 80% of equity in Bank of East Asia U.S. Branch gy Selection, The Chinese for 140 million U.S. dollars in January 2011 Acquired 80% of the equity of Standard Bank Argentina Branch for 600 million U.S. dollars in August 2011 html ata Source: Thomson Financials, sorting of public data
10 V. Chinese banks are focusing on efforts to expand their international footprint With gradual global economic integration and China’s efforts to reform and open markets, China’s banking industry is gradually accelerating efforts to expand internationally. By establishing new institutions, merging and acquiring institutions and relying on partners, many banks are expanding their scope of business and enhancing their cross-border business capacity. Generally speaking, internationalized operations conducted by Chinese banks still lag behind the operational capacity of other global multi-national banks. In the post-crisis era, where global expansion, information sharing and market orientation is progressing, the banking industry’s efforts to “go out” have become the intrinsic requirements for promoting national economic development strategy, participation in international financial cooperation and competition, and the acceleration of bank operation upgrades. The globalization of Chinese banks is starting to place (see Figure 4). As of the end of 2010, five large commercial banks established a total of 89 primary operating institutions in Asia, Europe, the Americas, Africa and Oceania, and acquired or purchased shares from 10 overseas institutions; 6 joint-stock commercial banks established 5 branch banks and 5 representative offices overseas; and 2 urban commercial banks established 2 representative offices overseas. Within 20 days after November 8, 2011, Bank of Communications alone had 3 overseas branch banks or subsidiary banks open for business.29 In 2010, the total assets of the overseas offices of the Industrial and Commercial Bank of China reached 75 trillion U.S. dollars, and had grown by 45.1 percent compared with the same period the previous year. Total pre-tax profits equaled 1trillion U.S. dollars, and had grown by 37.2 percent compared with the same period the previous year. By 2010, the total assets of the overseas branch banks of Bank of Communications reached 34.7 billion U.S. dollars, and had grown by 30.5 percent compared to the beginning of the year. Realized operating profits totaled 335 million U.S. dollars, and had grown by 30.1 percent year over year.30 29 Cai Esheng: Capacity of Banking Industry to Make Use of Both Domestic and Overseas Markets and Resources Is Enhanced, China Securities Journal, November 10, 2011, http:// www.chinadaily.com.cn/ hqcj/zgjj/2011-11-10/content_4322977.html. 30 Industrial and Commercial Bank of China and Bank of Communications 2010 Annual Reports; Internationalization of Chinese Banks: Current Status and Strategy Selection, The Chinese Banker, November 2011, http://www.dooland.com/ magazine/article_174393. html. Figure 4. Major Overseas Merger and Acquisitions of Chinese Banks in Recent Years Data Source: Thomson Financials, sorting of public data Bank of China • Acquired 100% of equity in Singapore Aircraft Leasing Enterprise for 965 million U.S. dollars in December 2006 • Bank of China (Hong Kong) acquired 4.94% of equity in Bank of East Asia (Hong Kong) for 3.95 billion Hong Kong dollars in November 2007 • Acquired 70% of equity in the Bank of East Asia (Canada) for 72 million U.S. dollars in June 2009 China Construction Bank • Acquired 100% of equity in the wholly-owned Asia subsidiary of Bank of America for 9.71 billion Hong Kong dollars in 2006 • Acquired 100% of equity in AIG affiliate AIG Finance (Hong Kong) for 70 million Hong Kong dollars in August 2009 China Minsheng Bank • Acquired 5.2% of equity in UCBH Holdings Inc. for 92 million U.S. dollars in October 2007 China Development Bank • Acquired 3.1% of equity in Barclays Bank of the UK for 2.2 billion euros in August 2007 China Merchants Bank • Acquired Wing Lung Bank of Hong Kong as its wholly owned subsidiary for over 30 billion Hong Kong dollars from 2008 to 2009 Industrial and Commercial Bank of China • Purchased 90% of equity in Bank Halim of Indonesia in 2006 • Acquired 80% of equity in Seng Heng Bank of Macau for 583 million U.S. dollars in 2007 • Acquired 20% of equity in Standard Bank of South Africa for 36.67 billion South Africa Rand in October 2007 • Acquired 97.79% of equity in ACL Bank of Thailand for 17.71 billion Thai Baht in September 2009 • Acquired 100% of equity in Fortis Securities of the U.S. in October 2010 • Acquired 80% of equity in Bank of East Asia U.S. Branch for 140 million U.S. dollars in January 2011 • Acquired 80% of the equity of Standard Bank Argentina Branch for 600 million U.S. dollars in August 2011