Do China’s big banks enjoy a monopoly?

It ought to be made clear from the very start that the banking industry in any country must operate on the basis of permissions. To open and run a bank requires special qualifications and regulatory approval. The procedures for getting the approval in the United States are not any simpler than in China. So the fact that opening a bank requires the regulator’s rigorous examination and approval is not evidence that the state has monopolized the banking sector.

Let’s take a look at the capital structure of China’s banking industry. Non-state equity investments in the Big Four state-owned banks plus the Bank of Communications – the Big Five – exceed 20 percent of the total. Private capital in the 12 joint-stock commercial banks accounts for about 41 percent of the total.

The ratio for the 145 city commercial banks is about 54 percent, and it is more than 90 percent for rural financial institutions, namely 337 rural commercial banks, 147 rural cooperative banks and 1,927 rural credit cooperatives. So the claim that the country’s banking industry is monopolized by the state does not conform to reality.

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About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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