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The Listing of Chinese State-Owned Banks and their Path to Banking and Ownership Reform

Published online by Cambridge University Press:  16 March 2010

Paul B. McGuinness  and
Kevin Keasey
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Abstract

China's leading state-owned banks have undergone radical transformation in recent years, with six of the country's top seven players listed in both Hong Kong and Shanghai. We first consider how the banks were reorganized for initial public offering, in terms of the removal of non-performing loans and the massive recapitalization of their balance sheets. Second, and more importantly, we consider whether they have been able to retain market share, further commercialize and enhance overall financial positions post-listing. Through in-depth case analysis of the six state-owned banks, we show that post-initial public offering they have significantly improved profitability, loan book size, loan book quality and capital reserve protection. However, we caution that the debilitating effects of the global credit crunch may slow or even arrest further progress across these dimensions in the near term. We conclude that China's leading banks have benefited materially from their transition, and have accordingly developed a range of competitive and co-operative strategies not only to sustain domestic market advantage but also to penetrate overseas markets.

Type
Research Article
Information
The China Quarterly , Volume 201 , March 2010 , pp. 125 - 155
Copyright
Copyright © The China Quarterly 2010

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25 As indicated in the BOCOM Prospectus: “Subject to certain limited exceptions, HSBC has agreed not to sell its H Shares prior to August 18, 2008.” “Substantial shareholders,” p. 198, n. 1.

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34 Thanks are due to an anonymous reviewer for comments on this point. In addition, as noted by Yusho Cho, “Bank of China profits from interest rate regulations,” The Nikkei Weekly, 24 March 2008, stipulated deposit and lending rates serve as the respective maximum and minimum rates. Spread levels were determined using Datastream.

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