The Asia Global Payment Summit. Bali, Indonesia. 10-11 October 2019

Listing of Small and Medium-sized Chinese Banks Expected to Accelerate

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Domestic analysts expect the listing of small and medium-sized Chinese banks to gather pace following the latest meeting of China’s Financial Stability and Development Commission (FSDC).

A meeting of the FSDC convened on 27 September highlighted further opening of the Chinese financial sector, efforts to encourage overseas financial institutions and capital to enter domestic financial markets, and raising the vitality and competitiveness of China’s financial system.

The FSDC also called for “focused support on capital supplementation by small and medium-sized banks…accelerating the establishment of long-term effective mechanisms for capital supplementation by commercial banks; enriching channels and capital resources for banks to supplement capital, and further clearing out transmission channels for flows from the financial system to the real economy.”

Yao Yudong (姚余栋), chief economist with Dacheng Fund Management Co., Ltd., said to Securities Journal that reference to “focused support for capital supplementation by small and medium-sized banks” signals the provision of a greater number of preferential policies for small and medium-sized banks to service the real economy.

According to Yao this will be of benefit to raising the lending ability of non-listed banks and reducing financing costs for the real economy.

Yao said that small and medium-sized banks enjoy stable operation at present and that their overall risk is under control, with considerable ability to service the real economy.

In Yao’s estimation too few small and medium-sized banks are listed on Chinese bourses at present, particularly compared to mature financial markets abroad.

In his estimation the number of small and medium-sized A-share banks in China is still under 40 in total.

Yao expects Chinese authorities to drive an acceleration in listings of small and medium-sized banks in order to better service the financing needs of China’s real economy, and in particular private enterprises and small, medium and micro-sized enterprises.

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