China's new postal bank pushes the
envelope By Olivia Chung
HONG KONG - With the restructuring of
China's postal system, the China Postal Savings
Bank has been formed with the aim of broadening
access to financial services across the country.
The institution aims to become the
country's fifth-largest bank after the "Big Four"
state lenders - the Industrial and Commercial Bank
of China, Bank of China, China Construction Bank
and the Agricultural Bank of China (ABC).
On January 29, the restructured State Post
Bureau (SPB) and the
newly established China Post
Group (CPG) were officially launched as a result
of China's restructuring of its postal system.
Under the restructuring scheme approved by
the State Council in mid-2005, the SPB will be the
government regulator of postal services, while CPG
will concentrate on the business operations of
postal services. Until the restructuring the SPB
had been both the market regulator and business
operator in the sector.
Liu Andong, former
director of the China Postal Savings and
Remittance Bureau (CPSRB), has become general
manager of CPG, and Ma Junsheng, former deputy
director of CPSRB, has been made head of the SPB.
At the end of last year, the China Banking
Regulatory Commission (CBRC) approved the
establishment of the China Postal Savings Bank
(CPSB) to take over the banking businesses from
the SPB. As such, CPSB will replace the
88-year-old CPSRB.
Thus the launch of the
SPB and CPG not only signifies the separation of
business operations and supervisory functions, but
also paves the way for the CPSB to start operating
officially. With the restructuring, CPG will be
the owner of the postal bank, but it will be under
the supervision of the CBRC. The new bank's
registered capital will be 20 billion yuan (US$2.6
billion). The date for it officially to begin
operating has not been set.
The CPSRB
started business in 1919 and was authorized by the
central People's Bank of China to accept deposits
in 1951. In 1953, its deposit-taking business was
suspended. In 1986, the postal savings service was
resumed, but it was not allowed to make loans
until recently.
The idea of turning a
postal savings service into a bank was first
proposed by the central bank in 1997, and it was
approved by the State Council in July 2005. This
was a key part of the restructuring of the
country's postal-services system.
On
approving the establishment of the CPSB, the
banking watchdog said in a statement on its
website that the new bank will operate through the
existing network of postal outlets, establishing
internal controls and risk management systems
according to the requirements of commercial banks.
As the postal system has a network of
37,000 outlets across the country, the new bank
will become the second-largest lender in terms of
outlets, exceeded only by the ABC.
By the
end of June 2006, the balance of postal savings
was more than 1.5 billion yuan, accounting for
9.5% of national deposits, so the CPSB will become
the nation's fifth-largest bank after the Big
Four.
As the postal network widely
services the countryside, the launch of the postal
savings bank is expected to boost rural banking.
This is in accordance with Beijing's new strategy
to boost agriculture and development in rural
areas.
The average per capita income in
rural China stood at 2,760 yuan in the first nine
months of last year, less than one-third of the
8,800 yuan earned by urban dwellers, according to
the National Bureau of Statistics.
Average
per capita borrowing by rural dwellers stood at
5,000 yuan at the end of 2005, less than 10% of
the amount in cities, according to China Daily.
Therefore, turning the postal savings
service into a new bank is one of the key ways for
the government to improve rural financial
services, diverting some of the cash back into the
countryside, which boosts the economy in areas
where poverty poses a potential threat to social
harmony.
According to the CBRC, the new
bank will specialize in retail banking and
intermediary services, targeting rural areas with
its extensive network.
The postal bureau
won regulatory approval last August to help sell
mutual funds through some of its outlets, while it
owns a 24% stake in China Post & Capital Fund
Management Co, which launched its first
equity-invested mutual fund in late August.
Early this month, hosted by Liu Andong,
postal chiefs of the 31 provinces on the mainland
gathered in Beijing to discuss the business
operation of the new bank.
The Shanghai
Securities News quoted an unidentified source as
saying the bank will soon set up branches in
selected provinces in the country's eastern,
central and western regions on a pilot basis in
the first half of the year.
With the first
installment of the required registered capital
total of 20 billion yuan, the headquarters of the
new bank will be set up soon, the source said.
With its aim of improving financial
services in the countryside, the new bank will set
up a rural financial service department to handle
the overall development of rural banking.
In order to expand its revenue base, the
postal savings system has also expanded its
business in recent months to making loans to
individuals and businesses on a pilot basis.
The establishment of the new postal bank
is welcomed by rural residents and mail and
banking industries.
Some believe the new
bank has great potential for further development,
due to its broad geographical service coverage,
its historical connection with rural residents and
the increasing demand for loans in rural areas.
The CBRC said in a statement on its
website last week that China's rural cooperative
financial institutions reported loan growth of 20%
last year, faster than the average of 15% in the
country's banking sector.
However, some
analysts cast doubts on the development of the new
bank, saying it may not have adequate risk control
capability. Amid the intense competition
brought by big local and foreign banks, there is
much work ahead for the new bank, including
diversifying its business and gaining a solid
foothold in the financial sector.
HSBC,
Standard Chartered and Grameen Trust have
expressed interest in establishing outlets in
rural regions, while seven domestic banks,
including China Minsheng Banking Corp, Beijing
Rural Commercial Bank and Tianjin Rural
Cooperative Bank, have also applied for permission
to expand their businesses into rural areas.
Olivia Chung is a senior Asia
Times Online reporter.
(Copyright 2007
Asia Times Online Ltd. All rights reserved. Please
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