On the System Reconstruction of State-owned Commercial Banks

Author: Xiong Jizhou
Publisher:
Publish Date: 2004-03-01
Features: This book takes the four state-owned commercial banks—Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), and China Construction Bank (CCB)—as the research subjects, exploring the target models and path choices for their institutional restructuring. The book first conducts an in-depth analysis of the systems and characteristics of modern commercial banks in mature market economies, concluding that the growth of commercial banks ultimately converges on the modern corporate system. Based on this, the book applies modern corporate theory to study the institutional restructuring of the four state-owned commercial banks from three fundamental levels: property rights principal-agent relationships and organizational systems. It also examines internationally available experiences for reference and points out that the fundamental solution for the four state-owned commercial banks lies in institutional restructuring, not merely "technical imitation." They need to be transformed into modern joint-stock companies with multiple property rights owners, equipped with market-oriented corporate governance and hierarchical organizations. This book is suitable for government research and decision-making personnel, banking industry professionals, and faculty and students of financial majors in higher education institutions.
The "two lows and one high" (low capital adequacy, low resource allocation efficiency, and high proportion of non-performing assets) issues faced by the four state-owned commercial banks (hereinafter referred to as "state-owned commercial banks"—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank) not only affect China's GDP growth in the era of monetary economy, making it difficult to achieve economic development through financial deepening, but also pose significant challenges to the national banking sector as it faces the entry into the World Trade Organization. After 2007, foreign banks will enter China's market in large numbers, fully operating RMB business, bringing substantial shocks. For China, which primarily relies on indirect financing for financial resource allocation, the state-owned commercial banks bear a heavy burden.
To enhance the core competitiveness and growth of state-owned commercial banks, since the reform and opening-up, the government has adopted measures such as "delegating power and sharing benefits," capital injections, andnon-performing assets to address these issues. However, the results have not been entirely satisfactory. After "delegating power and sharing benefits," short-term behavior became prominent; after capital injections, capital adequacy ratios continued to decline; and after the debt-to-equity swap, non-performing assets began to accumulate again, and on a large scale, leading to calls for a second round of asset. This forces us to consider the root of the problem from the institutional perspective, recognizing that institutional restructuring is necessary to prevent and control these drawbacks, rather than relying solely on "technical imitation."
When studying the institutional restructuring of state-owned commercial banks, I adhere to the methods of institutional economics and comparative institutional analysis, supplemented by historical and general equilibrium analysis. To thoroughly examine the root causes of institutional flaws in state-owned commercial banks, I first conduct an in-depth exploration of the systems and characteristics of modern commercial banks in mature market economies, concluding that the growth of commercial banks ultimately converges on the modern corporate system. This forms the logical thread that runs throughout the book. Since the characteristics of modern commercial bank systems are primarily reflected in the modern corporate system, modern corporate theory is applied to study the institutional restructuring of state-owned commercial banks.