China willing to allow first private banks | Business| Economy and finance news from a German perspective | DW | 07.01.2014
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China willing to allow first private banks

Chinese regulators have announced they will allow the setting up of some private banks to compete with state-owned lenders in the world's second-largest economy. But they said strict supervision would be applied.

The China Banking Regulatory Commission (CBRC) confirmed it would allow between three to five fully private banks to be set up in the country this year in a bid to further open up the financial sector.

It said private capital could be used to establish independent private banks or restructure existing ones.

"The first batch of private banks will be set up on a trial basis," the CRBC said, adding they would be approved when conditions were mature and warning the new entities would be subject to strict regulatory procedures and enhanced supervision.

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There have been no indication yet as to any competitors shortlisted for creating private banks. But experts said likely candidates were home appliance retailer Suning and Internet giant Alibaba with its third-party payment division in place.

World Bank officials said an overhaul of the Chinese banking system was overdue to make the economy more productive.

The CRBC's announcement came amid efforts by the central government to rein in a surge in commercial credit and borrowing by local authorities. Debts owed by local administrations soared by 70 percent over the past three years to the equivalent of $2.9 trillion (2.13 trillion euros).

hg/ph (AP, AFP)

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