A new report on the Chinese banking sector says globalisation and fintech will be essential to its future prospects.
The China Banking 2030 report released by international management consulting firm Oliver Wyman points to strategic management of financial resources, digital banking and a clear globalisation strategy as being essential to ensuring the future competitiveness of Chinese banks on an international playing field.
According to the report the new conditions of the Chinese economy means the traditional model of banks relying upon lending and interest spreads to flourish is now outdated.
“We’ve seen the end of the era when banks would use their branches to obtain deposits and look for government support, and big projects and big loans to to achieve a net interest spread,” said Wen Tao (翁涛), partner at Oliver Wyman to Reuters China.
According to Wen Chinese banks must adopt targeted methods and strategic measures to resolve the difficulties involved in this transition, as well as change their traditional way of thinking and effectively incorporate the strategic management of financial resources into business procedures.
Chinese banks will also need to make full use of digitisation and accelerate globalised development in order to effectively prepare for the next phase of growth.
Peter Reynolds, Hong Kong-based partner at Oliver Wyman, said that the merger of the banking and insurance authorities into the China Banking and Insurance Regulatory Commission had served to create a new “super regulator” which would tighten up the financial regulatory framework.
This would create new demands with respect to leverage, liquidity and financial stability, and market leaders will need to search for new methods to optimise their financial operations in order to achieve sustainable long-term growth.
Given the complexity of the Chinese market’s pursuit of digitisation reforms such as big data applications, banking sector institutions will need actively study and adopt digitised operations in order to raise their productivity and reduce operating costs.
These measures would include the automatisation of internal banking management and operations, the use of artificial intelligence to provide personalised products to clients, and multi-party real-time information sharing.