Reform of China's State-Owned Banks a Success

6 Pages Posted: 8 Mar 2010

See all articles by C. H. Kwan

C. H. Kwan

Nomura Institute of Capital Markets Research

Abstract

China became serious about disposing of the nonperforming loans in its banking sector in response to the Asian financial crisis of 1997-98. In 2003, the big four state-owned banks (the Industrial & Commercial Bank of China, China Construction Bank, Bank of China, and Agricultural Bank of China), as well as the China Development Bank, began the process of reorganizing as joint stockholding companies in preparation for listing their shares. The objective of the first stage of reform, nonperforming loan disposals, was to overcome their negative legacies, while the second stage of reform, reorganization as a joint stockholding company, is aimed at improving corporate governance in the banking sector and turning the state-owned banks into genuine market actors. The banks that successfully carried out this strategy all the way to their IPO, the Industrial & Commercial Bank of China, China Construction Bank, and Bank of China, became the world's top three banks in terms of market capitalization as of end-March 2009.

Keywords: Chinese Banks, Joint Stockholding Companies, Listing

JEL Classification: G21

Suggested Citation

Kwan, C.H., Reform of China's State-Owned Banks a Success. Nomura Journal of Capital Markets, Vol. 1, No. 4, 2009, Available at SSRN: https://ssrn.com/abstract=1566662

C.H. Kwan (Contact Author)

Nomura Institute of Capital Markets Research ( email )

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