Future Market Prospects and Trends of China's Financial Industry

I. Development Status of Financial Services Industry in China

In recent years, with the deepening of financial reform and opening up, the market environment faced by China's financial industry has been greatly improved, especially since the 1997 Southeast Asian financial crisis, governments at all levels have placed financial security and steady development in a very important position, adopted a number of management measures, strengthened their own construction and prevented financial risks, and made great progress. However, after China's entry into WTO, foreign-funded financial institutions will enter the China market, and the financial industry in China is still under great pressure, and its development status is not optimistic. Next, we will talk about the development status of banking (mainly commercial banks), insurance and securities industry in China.

(1) Banking

At present, China's commercial bank market is basically divided by the four major state-owned commercial banks, with a high degree of monopoly. Its business mainly focuses on traditional deposit, loan, remittance bank and foreign exchange business, with little or no investment banking business, such as financial leasing business, insurance business, trust business, property consultancy and consulting business and tourism advertising business. These business scope restrictions have affected the profitability and innovation ability of financial instruments of China's state-owned commercial banks, and the capital is seriously insufficient, and the loan ability is subject to endogenous constraints. Due to the poor efficiency of state-owned banks and the great pressure to digest their own non-performing assets, they are unable to supplement the fund with operating profits. Therefore, the accumulation of non-performing assets leads to the asset adequacy ratio of some state-owned banks not reaching the requirement of 8% stipulated in the Basel Accord. Due to weak profitability and inefficient use of assets, commercial banks have a large number of bad debts and bad debts. All these will put state-owned commercial banks at a disadvantage in the competition with foreign banks.

(2) Insurance industry

In the past twenty years, the insurance industry in China has developed at an average annual rate of 39.6%. It took 15 years to realize the first premium income of 50 billion, and only 3 years to realize the second premium income of 50 billion (see figure 1- 1 and 1-2). By the end of 2000, the premium income reached 654.38+059.59 billion yuan. At the same time, the main body of the insurance market is increasingly diversified. At present, there are 40 insurance companies in China, forming an insurance market structure with state-owned insurance companies and joint-stock insurance companies as the main body, Chinese and foreign insurance companies coexisting and many insurance companies competing. However, there are still a series of problems in China insurance industry, such as the strength of insurance companies.

Poor, less channels for the use of funds (insurance income is still dominated by premium surplus), low efficiency and management technology, and the service level can not adapt to competition. Therefore, once Chinese insurance companies really compete with foreign insurance institutions, the insurance industry will face a huge impact.

Figure11989 —— Trend of premium income in China in 2000

Figure 2 Growth trend of premium income in China in 2000

(3) Securities industry

China's securities industry started in 1980s. After the establishment of 1990 and 199 1 year, Shanghai and Shenzhen Stock Exchanges have made great progress through tortuous course. The first is the enhancement of financing ability. The financing amount of China stock market increased from 9.978 billion yuan in 1994 to1922.2 billion yuan in 2006, accounting for 1 1.45% of indirect financing (bank loans). Secondly, with the continuous growth of the size of the securities market, the stock trading volume is also increasing. The stock trading volume of 1993 reached 362.72 billion yuan, and the stock trading volume reached a peak of 6,082.66 billion yuan in 2000, an increase of 16.7 times. In 200 1 year, the number of listed companies in China has reached 1 154, with 66,396,800 investor accounts. The above data show that the China stock market has taken shape after 10 years of rapid development. However, because China's securities industry has developed under certain protection, it has not fully integrated with the international market, and there are still some problems in its further development:

First of all, domestic securities institutions have narrow business scope, single variety and similar structure. The business scope is limited to underwriting, brokerage and self-management of three traditional domestic businesses. Although there are also corporate financial consulting services, most of them are auxiliary means to win underwriting projects. The products and services provided are very similar, and the importance of financial innovation is still not fully understood.

Secondly, the financing channels are not smooth, and there are not many listed securities companies. There are three channels: interbank borrowing, treasury bond repurchase and capital increase and share expansion. Short-term financing is the main financing, and there is no long-term financing channel urgently needed for the development of securities firms.

Third, the efficiency of capital operation is poor.

Fourth, the asset management business of securities firms is chaotic.

Fifth, the income of securities brokerage business declined.

All these indicate that the new China securities industry, which has only grown for more than 20 years, will face enormous realistic pressure and compete with the powerful foreign securities companies that have been tempered by the capital market for more than 100 years.

Second, the development of Chinese and foreign financial services comparison

20011China has finally joined the WTO, and it will be an inevitable trend for Chinese and foreign financial institutions to compete on the same stage. If China's financial industry wants to occupy a place in this new competition, it must judge its own living environment by comparing and analyzing each other's advantages and disadvantages, and finally put forward its own strategic plan.

(1) Banking

1. Comparison of business scale

To measure the scale of a comprehensive commercial bank, there are mainly sub-indicators, such as total assets, tier 1 capital, number of branches, transnational operations, etc.

Table 1 Comparison of Operation Scale of Chinese and Foreign Commercial Banks (1999) Unit: US$ 100 million.

total assets

tier one capital

Number of branches

multinational operation

Industrial and Commercial Bank of China

4275.46

2 19. 19

There are many branches in China.

Transnational operation is in its infancy.

agricultural bank

2442.93

162.66

There are many branches in China.

Transnational operation is in its infancy.

China construction bank

2658.45

13 1.96

There are many branches in China.

Transnational operation is in its infancy.

Bank of China

3 162. 14

152.70

Global institutional layout

Global bank

Citibank

7 169.37

476.99

Global institutional layout

Global bank

BOA

6325.74

38 1.76

Global institutional layout

Global bank

Deutsche Bank

8437.6 1

174. 18

Global institutional layout

Global bank

Barclays bank

3988.25

140.55

Global institutional layout

Global bank

Source: Zhang and Ruan Banying: Comparison of Profits between Chinese and Foreign Commercial Banks and Countermeasures for China's Entry into WTO, Guide to Modern Commercial Banks, No.1, 2001; Overview of Assets, Liabilities and Financial Status of 30 Banks in the World, Kong Yong and Ma Gengzhi, China Economic Publishing House, 1996.

As can be seen from the table 1, the four major state-owned commercial banks in China are not inferior to international multinational commercial banks in terms of total assets and primary capital sources, and have entered the ranks of the largest banks in the world. However, judging from the number of branches and transnational operations, except for China Bank, which has many branches at home and abroad and has begun to show some characteristics of global banks, the other three state-owned commercial banks have just started their transnational operations despite the large number of branches. Therefore, from the analysis of business scale indicators, the biggest gap between China's state-owned commercial banks and foreign-funded comprehensive banks lies in the defects of global branch layout and the lag of transnational operation.

2. Comparison of business functions

The difference in business functions between state-owned commercial banks and foreign banks in China is mainly manifested in the restrictions imposed by the management authorities on mixed operation and separate operation (see Table 2). Britain, Japan and the United States revised the relevant laws in 1986, 1992 and 1999 respectively, and finally legally abolished the obstacles to mixed operation. China's Commercial Bank Law strictly prohibits commercial banks from engaging in non-banking business such as securities investment.

Table 2 Comparison of Chinese and Foreign Commercial Banks' Business

Commercial banking business

investment banking

insurance business

Authoritative legislative restrictions

Industrial and Commercial Bank of China