The banking industry in China Essay
The banking industry in China
The Chinese state had a relatively inflexible attitude towards banking till the regulatory controls were reasonably relaxed in the 1980’s. There was very heavy influence of the Soviet banking system on the Chinese Banks over the years and it is only lately that western banks have impacted the Chinese banking sector. The banks have adapted to new systems and procedures of financing very rapidly and today are at the fore front to provide financial services to the personal as well as the corporate sector. (China’s Economic System, 2004).
A key facet which needs to be mentioned is the ability of the Chinese banks to survive and grow despite both foreign as well as domestic crises. The banking system is thus considered critical to China’s overall growth given the high level of savings. Yet it will be able to maintain stability in the economy by controlling the inflow and exit of foreign capital. People’s Bank still continues to provide the financial stability and security in the Chinese banking system by providing the guide lines for implementation of monetary policy.
The reforms carried out in the financial sector are said to be continually providing a fillip to growth in China but these cannot be limited and need to be carried forward. Some areas identified by the OECD report (2005) include reduction of non performing assets, low capitalization and the need to support the market economy. Growth of the capital markets and management of risk and commercial approach to banking is another area which is considered significant. There is a need for better supervision over the management of the banking industry as the company progresses towards a market economy after many years of state control.
(OECD, 2005). Banking in China will continue to be under state control over the years despite the removal of regulatory controls as required by the WTO. However it needs to be accepted that regulatory controls on banks is a universal phenomenon. Thus Western Banks are also under some government control. Recent reports indicate that the United States was plodding four major European Banks, the UBS, the Credit Suisse, ABN Amro and HSBC not to carry out any banking activities in Iran. These banks are known to have severely curtailed such activities some of which have been fined during previous incidents of violations.
(Weisman, 2006). Analysis of Customer Survey An analysis of the findings of the customer survey has provided a number of significant conclusions related to the state of banking industry in China with particular reference to its reach to the existing customers. A primary issue is the selection of a particular bank by the customers. This as indicated by the survey is generally based on proximity of the location of the bank to the place of stay or work in that order and followed by the image and the services provided by the bank.
Penetration of internet banking is seen to be higher in the case of corporate customer, vis a vis the personal customer. However personal customers were more attuned to use of mobile banking than corporate customers. This is possibly as the needs of corporate customers are more diverse and not likely to be met on the mobile phone. There was also reluctance for greater use of mobile phone banking as they were not confident of the security and safety of the transactions. Thus risk was considered to be higher in mobile rather physical and internet banking.
A greater degree of assurance to the customers in this area will go a long way in enabling the banking system to switch customers to mobile phone banking which is more convenient and will provide them any time 24/7 connectivity to the bank. The distribution of the staff in the bank will have to be based on the frequency of customer’s visits. Most of the corporate customers are likely to visit daily, thus a more personalized service can be provided to them. Senior level staff could be proposed for this segment.
On the other hand, the total volume of personal customers may be much more than the corporate, hence a higher number of staff would have to be detailed for this segment. A distinct difference in experiences in personal banking between Bank of China and HSBC emerged which is covered as under :- • Quality of service in both the banks in relation to customer friendliness is some what similar. However HSBC has a major advantage of providing more efficient services as well as better follow up and timeliness.
• The customers of Bank of China who carried out physical banking were more satisfied with the service and preferred it over the internet. However it was not the case with HSBC which has a better internet service record. • Security is perhaps a primary consideration for customers to do physical banking.
Thus banks need to invest more in providing the customers greater confidence levels in security of transactions. • While a majority of customers agreed that the physical services were not economical they preferred to continue with the same due to reasons of safety, security and the need of a human touch.