外文文献翻译.doc

毕业论文英文资料翻译学 院： 商学院 专 业： 班 级： 姓 名： 学 号： 指导教师： 年 月chinas banking reform and profitability review of pacific basin financial markets and policies vol. 13, no. 2 (2010) 215236 world scientific publishing co. and center for pacific basin business, economics and finance research doi: 10.1142/s0219091510001925 erh-cheng hwa yang lei 1. introduction the world bank (1997) once claimed that chinas financial sector was the soft-belly in the economy. financial sector reform has long been argued as necessary to raise efficiency in the use of the capital and in rebalancing the economy toward consumption-based growth, without which the countrys growth sustainability is in jeopardy (see lardy, 1998; prasad, 2007).indeed, not too long ago, chinas state banks were deemed “technically insolvent” and their survival hinged solely on the nations abundant liquidity.however, after the launching of banking reform, strong profitability has returned to state commercial banks recently. but it may be too early to declare a complete victory on banking reform as yet, since chinese state banks have embarked on the path of reform not too long ago. in addition,their strong financial performance has ridden on the back of strong but unsustainable growth. as growth has begun to soften under the weight of a global recession in 2008, banks are expected to navigate in a more difficult economic terrain than hitherto. the aim of this paper is not to evaluate the effect of banking reform on bank performance, which is better tackled after the completion of a full credit cycle. rather, our aim is to take stock of the progress in reforming chinas state banks by reviewing the banking reformstrategy and analyzing their recent strong post-reform financial performancewhich, however, cannot be entirely separated from reforms efforts undertaken thus far. this paper has three sections. in section 2, we review the reform strategy of chinas large state banks, which is the main thrust of chinas banking reform, as well as its implementation. the section 3 analyzes 2007 financial performance focusing on the four largest state commercial banks that have floated shares in the market: industrial commercial bank of china (icbc),china construction bank (ccb), bank of china (boc), and bank of communications (bocom). the conspicuous exception is agriculture bank of china (abc), which is still in the process of restructuring for market listing at an appropriate time later. section 4 concludes with an assessment on bank performance.2. bank reform strategy and its implementation2.1. bank reform strategy before reform, state banks were solely owned by the state and served national economic policy goals.1 since they were not wholly profit-making commercial entities, common commercial banking criteria for evaluating their financial performance do not apply strictly. nevertheless, as soon as the country decided to embark upon the path of a socialist market economy in the october 1992 ccp congress, commercialization of the state banks had become a foregone conclusion. the goal of banking reform is to turn state banks into commercial entities that are competitive in the marketplace and can provide efficient intermediation of the nations saving. given their dominance in financial intermediation, the banks play a crucial role in the efficient allocation of capital.2.1.1. creating the enabling environment for banking reform the countrys market reform and opening program has greatly accelerated since 1992 when in october that year the 14th ccp congress declared that the goal of reform and opening was to create a socialist market economy,which effectively ended the experimental nature of economic reform and opening program launched since the late 1970s. the firming up of market-oriented reforms has created an enabling environment for a host of reforms central to the socialist market economy construct including foremost the banking reform. in early 1994, in response to the inflation threat, the government launched macroeconomic reform encompassing central banking,exchange rate management, and fiscal policy and taxation. the macroeconomic reform permitted the central authorities to regain macroeconomic control lost to local authorities in the decade of the 1980s under the decentralization policy of “fang quan rang li”.2 while decentralization ushered a period of rapid growth, it also generated significant macroeconomic instability.indeed, the pursuit of macroeconomic reform significantly dampened macroeconomic cycles in the 1990s. second, in the same year, the government created three policy banks state development bank, agriculture development bank, china exportimport bank to relieve state commercial banks of their traditional policy mandates. third, the government promulgated central banking and commercial banking laws in 1995 to provide the legal foundation for banking reform. fourth, beginning from 1996 the government began to vigorously pursuit enterprise reform that paved the way for banking reform, even this resulted in large and painful layoffs of redundant state workers. pursuing enterprise reform ahead of banking reform was necessary considering that state-owned enterprises were the main clients of state banks and hence their main source of non-performing loans npls, which was at the same time the contingent liability to the government. hence, unless the reform of stateowned enterprises takes hold, any reform effort of the state banks would be in vain. on the other hand, as soon as the state-owned enterprise reform was pressed forward, the banking reform could no longer be postponed. this is because as state-owned enterprises were restructured, liquidated, merged, or bankrupted out of existence, the banks must start to recognize the hidden losses on their books. this, in turn, triggered the need to recapitalize the banks, as a large amount of non-performing loan was written-off. fifth, the state council in february 2002 decided to reform solely stateowned commercial banks into internationally competitive financial enterprises, transform them into state-controlled shareholding commercial banks,and encourage listing their shares in the market. sixth, china banking supervisory committee was created in 2003 to raise the regulatory capacity to supervise banks. finally, adhering to the 2001 wto accession agreement, the government uses the entry of foreign banks into the local banking market to inject competitive pressure to the local banking industry in order to gain efficiency. beginning from the end of 2006, foreign banks can engage in local currency business.2.1.2. reforming corporate governance and restructuringthe balance sheet the countrys large state banks have followed several steps to undertake internal corporate reform. the first is to reform the corporate governance by inviting other investors to dilute the sole state ownership while still retaining its dominance. in particular, the banks have made an effort to seek foreign strategic partnership with the view to bringing in modern banking practices and technology. the broadening of ownership also entails selling a portion of bank shares to the equity market to make bank management accountable to the marketplace. to successfully woo outside investors, be it strategic partners or public investors, the banks must put forward a creditable inhouse reform plan and implement it credibly. no doubt, the better and more credible the internal reform plan is, the more likely it is for the banks to attract reputable outside partners and fetch a better deal with their counterparts or in the equity market. hence, the first step the government undertook was to strengthen the balance sheet of state banks whose credit flows had been clogged up by inadequate capital and piles of bad debts accumulated under the previous economic planning regime. in 1998, the government issued rmb270 billion (us$32.6 billion) worth of 30-year fiscal bonds to recapitalize the balance sheets of the four largest state banks: icbc, boc, ccb, and abc in order to comply with the international capital adequacy standards. again, on december 30, 2003, the government provided us$22.5 billion each to ccb and boc, with us$15 billion provided later in april 2005 to icbc to support their respective listings in the hong kong stock exchange.among the four largest state banks, ccb was the first to have its shares successfully listed in the hong kong stock exchange and thus the first to have its reform effort passed by the market test. in addition, as part of the scheme of recapitalization, the banks also issued subordinated debt to the local market:boc, rmb60 billion; ccb, rmb40 billion; icbc, rmb35 billion; and bocom, rmb12 billon. in 1999, the government created four asset management corporations amcs, one for each of the “big four”: icbc, ccb, boc, and abc, to manage rmb1.4 trillion of loans purchased from the books of the state banks at face value, of which 1.3 trillion were deemed non-performing (about 15% of gdp). the transaction was financed partly by central bank loan(rmb573 billion) and partly by treasury bonds (rmb820 billion). a second transferring of npls in the amount of rmb1.186 trillion to the amcs took place during the period from june 2004 through june 2006. the banks also launched reform measures to improve internal management including strengthening the human resource base, introducing modern risk management practices, and moving up the standard of npl classification to comply with the international standards.2.2. implementation of reform2.2.1. seeking diversification and attracting foreign strategic partners following the blueprint of reform, the banks have successfully launched and implemented the reform strategy. icbc, ccb, boc, and bocom all have their full state stake in the company diluted to below 70% by incorporating non-state ownerships, which includes foreign ownership, domestic legal persons, and public ownership (publicly owned and traded shares). among non-state owners, foreign strategic partnership usually has the highest stake in the company: icbc, 7.2%, boc, 13.9%, ccb, 10.3%, and bocom,18.7% (table 1). the participation of foreign and domestic capital as well as public shares in state commercial banks has not only strengthened bank capital, but also exerted a positive influence on the corporate governance, in particular in the case of foreign participation, in so far as it stems the undue intrusion of government into the banking business. second, all state commercial banks have installed modern corporate governance structure encompassing shareholders congress, corporate board plus outside directors and supervisors,supervisory board, and senior management structure. by the end of 2007, 33 foreign institutional investors have invested in twenty-five domestic banks, with a total capital injection of us$21.3 billion.these foreign strategic investors have entered in various strategic corporative agreements with domestic partners in widely diversified areas of banking,including retail banking, corporate governance and risk-management,trading, rmb derivatives and currency swaps, foreign exchange structured products, and trade and small-and-medium enterprises sme financing. in addition, domestic banks and their foreign partners share their networks and custom base for providing services and cross-selling financial products.finally, human resource development program is a common feature in strategic corporative agreements, with training courses offered in sme management and financing, wealth management, fund trading, risk management, and implementation of the basel capital agreements, etc.2.2.2. successful public listings after launching internal restructuring and successful attraction of reputable foreign strategic partners, state commercial banks were successful in listing their shares in the hong kong (h share) and shanghai (a share) stock exchanges and hence for the first time subject to the market discipline:bocom, june 2005; ccb, october 2005; boc, june 2006; icbc, october 2006 (which was the first double listing in both the hong kong stock exchange and the shanghai stock exchange). public listing of bank shares together raised rmb445 billion (us$60 billion) in the open market, about 26% of combined net capital. in comparison, the funds raised through foreign strategic partners was us$15 billion. in 2007, two small shareholding banks were listed in the shanghai stock exchange, bringing the total listed to seven among 12 shareholding banks. in addition, three city commercial banks based, respectively, in beijing, nanjing, and ningbo were listed in the shanghai a share market, paving the way for other city commercial banks to restructure and then seek listing in the stock exchange. having benefited from rising share prices, icbc, ccb, and boc were, respectively, the first,second, and the fourth largest bank in the world by market capitalization at the end of 2007: us$338.9 billion, us$2202.5 billion, and us$197.8 billion.2.2.3. strengthening capital by the end of 2007, nearly 80% of banks by asset have fulfilled capital adequacy standards. the capital adequacy ratio for the four listed state commercial banks was, respectively, 13% for icbc; 13.3% for boc; 12.6% for ccb; and 14.1 for bocom. the core capital adequacy ratio was, respectively, 11% for icbc; 10.7% for boc; 10.4% for ccb; and 10.2% for bocom.2.2.4. building risk management systems since 2006 ccb and other large state commercial banks have begun to introduce a vertical risk management system to consolidate risk management into the hands of the newly created chief risk officer. the reform has helped to stem undue interferences in the loan decision process at the local level. at the same time, by taking advantage of information technology, banks have begun to streamline and optimize the operational processes and procedures in order to reduce operational risks. banks have also begun to use quantitative risk models to gauge and simulate various risk scenarios facing them such as stress test. the concept of economic/risk capital has been adopted to manage risk quotas, allocate bank resources, and pricing of products. banks have also strengthened the analysis of market and liquidity risks while controlling operational risks through improved internal control procedures by employing quantitative tools and models. last but not least, banks have taken steps to build a new risk or credit culture.2.2.5. pursuing strategic transformation of the business model chinese banks have traditionally focused on corporate businesses, the wholesale banking so to speak. however, as the local capital market gradually matures and the income and wealth of chinese households continue to grow apace, the banks find growing business opportunities in consumer-oriented financial services such as mutual funds, mortgage financing, wealth management, and personal loans. these are also areas of financial services where the newly arrived foreign banks aim to capture with their competitive strength.hence, both for seeking new sources of profit growth and achieving a more diversified and balanced revenue base, as well as for meeting the competition from foreign banks head on, the chinese banks are compelled to seize the opportunity and meet the challenge to embark on the path of a strategic transformation of the traditional business model toward retailing banking.new thrusts of retail banking include credit card, personal loans, and wealth management, mutual fund, insurance products and other products generating fee-based income. retail banking, in turn, has called for greater investment in information technology to develop efficient systems in processing personal loan, internet banking, and tele-banking, as well as improve the efficiency of retail networks to better serve the needs of retail customers.large state commercial banks like ccb have also initiated special programs to cater to the need of small and medium enterprises, smes. in addition, they have started to branch out into new areas of financial services, thus gradually and steadily moving toward universal banking encompassing investment banking, issuance, securities, private banking, and financial leasing.banks have also started to grow overseas business either by establishing more new overseas branches or through merging and acquisitions of foreign financial entities.4. conclusion: assessment of bank performance the strong financial performance of large state banks was carried into the first half of 2008 even as growth slowed by nearly 2 percentage points to 10.4% from the first half of 2007 due to a combination of falling external demand and tighter credit policy. in the first half of 2008, net profit (profit after tax) grew, respectively, 71.3% for ccb, 56.8% for icbc, and 36% for boc over a year ago. although the reduction of corporate income tax from 33% to 25% accounted for partly the increase in profit, but the key underlying factors driving profit growth remained the same as the last year. first,net interest income continued to benefit from rising interest margins as well as rapid asset growth and still is the main source of operating income, possibly for the foreseeable future. second, fee and commission income again witnessed an explosive growth: ccb, 59.3%; bocom, 50%, icbc, 48%;boc, 45.1%, in spite of a sharply cooled stock market that has curtailed income derived from hot-selling market-based financial products of the previous year such as stock mutual funds. for large state commercial banks,the share of fee and commission income in total operating income reached a new