OPINION> Commentary
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OPINION> Commentary
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Banking for the masses
(China Daily)
Updated: 2008-07-22 07:42 In the midst of China's economic slowdown, it is reassuring to know that domestic commercial banks have managed to further improve their performance. Thanks to their efforts to enhance risk control, the bad loan ratio in China's commercial banks has reduced to 6.1 percent as of June 30, 0.62 percentage points lower compared with that at the beginning of 2008. Major commercial banks had combined bad loans of 1.18 trillion yuan ($172.48 billion) by the end of June, 24.71 billion yuan less than at the beginning of this year. Though an orderly slowdown is what Chinese policymakers have wanted in order to shift the country's growth pattern toward a more sustainable one, the severe natural disasters and rapidly weakening external demand in the first half year went far beyond expectations. A sound banking sector has surely been a lot of help in preventing such negative factors from derailing the country's growth train. Given that domestic and international uncertainties remain abundant in the months ahead, it is quite understandable that the chairman of China Banking Regulatory Commission urged domestic banks to further increase risk prevention and boost capital adequacy in the second half year.
However, the more noteworthy call the banking regulator gave was that financial institutions should extend financial services to small-sized enterprises and rural industries. Such a call indirectly confirmed a trend that commercial banks have increasingly concentrated their financial support on large State firms as the country adopted a tightening monetary policy to fight soaring inflation. It might make sense for commercial banks to focus on catering to larger borrowers. But inadequate financial support could choke the growth of small and medium-sized enterprises and thereby increase unemployment. It is estimated that 10 million more people will enter the country's workforce every year between now and 2010. So China still cannot afford to ignore development of most labor-intensive small and medium-sized enterprises. As for rural financial service, the fact that a total of 2,868 counties or villages had no financial institutions at all and 2,645 of them were located in the country's west speaks volumes about a key cause behind the huge development gap between the rural and urban areas and that between the western and eastern regions. The banking sector must assume its role in facilitating the national drive to bridge the development gaps for the sake of common prosperity. (China Daily 07/22/2008 page8) |
