BOC Research Highlights Three Key Trends for Transformation of Chinese Banking Sector

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The Bank of China (BOC) Research Institute says the Chinese banking sector is on track to undergo “accelerated transition,” and highlighted three key trends that will take place during this process.

Wang Jiaqiang (王家强), senior researcher with BOC Research, said that banking operations and regulation will undergo “massive transition” given the major changes faced by the global economy.

“In future China’s banking sector must adjust to these broad trends, and accelerate a transition in its model of development,” said Wang during a speech delivered on 16 December at the 18th Caijing Fengyunbang Banking Summit in Beijing.

Wang outlined three trends for China’s banking sector in the near future.

  1. Adjusting to the development trend of domestic circulation. “Bank loans should be directed more towards key sectors and weak links, including tech innovation, strategic emerging sectors, green environmental sectors, household consumption upgrades and rural revival.”
  2. Adjusting to the new conditions of external opening. “The internationalisation level and quality of the banking sector should be further increased, and the regional structure directed more towards the Asia-Pacific, Belt and Road and key international financial centres, and tipped towards regions with large potential growth, friendly bilateral relations, frequent trade and investment interactions, and tight industry chains.”
  3. Adjusting to the trend of continual increase in the direct financing share. “The banking operations structure should continually expand non-interest revenues, and provide more investment banking services for the issuance of stocks and bonds by enterprises, and the provision of investment and wealth management, insurance and trust, private banking and new payments and settlement services to retail clients.”

“At present lending by our banks is concentrated more in traditional areas such as infrastructure, real estate and the manufacturing sector, and the revenue structure focuses mainly on the interest rate spread,” said Wang.

BOC Research forecasts that growth in the total assets of the Chinese banking sector will reach 10 – 11% in 2021, and that overall profit growth will also see a turnaround.

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