China's central bank governor outlines reforms to streamline system
Andrew Browne
BEIJING, December 28: China faced "a serious threat from financial risk" though it was in no immediate danger of being caught in the Asian economic crisis, the central bank governor was quoted as saying on Sunday.
In a speech to parliament highlighting the problem of non-performing bank loans, Dai Xianglong conceded that state-run commercial banks had lost control of their branches in certain areas.
"Losses have been serious and the risks are high," the financial News Daily quoted him as saying.
"We have to change this situation as soon as possible," Dai said, describing the unwieldy management structure of commercial banks and the central bank.
He said the four big commercial banks in future would concentrate on lending to large and medium-sized enterprises in the cities, leaving local lending to a financial system centred on credit co-operatives.
But Dai gave few concrete details of how the banking bureaucracy would be streamlined.
Overlapping banking and government departments led to political pressure on local bankers and regulators to approve funding for projects and state enterprises in their districts, regardless of their viability.
A reorganisation of the People's Bank of China along the lines of the US Federal Reserve, concentrating power in a few regional centres, is widely expected.
Commercial banks are expected to drastically reduce the number of their branches.
The shortcomings of the present system "are becoming more obvious every day", Dai said.
They compromised the independence and integrity of the central bank and resulted in a huge waste of manpower and capital, he said.
Dai repeated an earlier announcement that credit quotas imposed on the four commercial banks would be scrapped starting from January 1. Quotas, set each year, were a pillar of past central planning in which credit was channelled to state industry through administrative fiat.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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