Most of Chinese biggest banks are not real banks. These companies are not only commercial banks, but also parts of financial institutions. They are strongly supported by government and with the background of political power, these banks always make profits easily. “These banks’ revenues as a share of China’s economic output equaled nearly 3% last year, whereas the highest ratio achieved in recent decades by American banks was only 1% of GDP in 2006.”(data from reference article) Central government’s supports have played an important role in these banks’ fast growth.

However, currently, the motivation which has driven China’s four biggest banks to their high revenue goals is nearly breaking down. Although they are still profitable not, a wave of non-performing loans is coming, which will soon affect these banks badly. As the Chinese economic situation is being changed, the government is less willing than before to pour credit into these government-owned firms. Chinese big banks are becoming real institutions. which, in my opinion, in the next step of Chinese market reform. And it will reduce the monopoly of government-owned companies and make the whole market more active and open.

Reference:

http://www.economist.com/news/finance-and-economics/21584331-four-worlds-biggest-lenders-must-face-some-nasty-truths-giant-reality-check

Picture:

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