Chinese banks are not ready for the competition they will face from foreign banks that will come after China’s accession to the World Trade Organisation, said Liu Mingkang, chairman of the Bank of China. China’s banks still face severe problems in their standards of governance and risk management and their levels of governance, profits and capital adequacy. However, Liu said Chinese banks were tackling these problems and were willing to seek – and pay for – advice from consultants and overseas institutions.
He conceded that it would take Bank of China up to seven years to bring the level of non-performing loans down from the 28 per cent reported at the end of 2000 to the international standard of 4-6 per cent.
Dai Xianglong, governor of the People’s Bank of China, said that China would reform its state banks to help them compete internationally, Reuters reported. The next several years would be a crucial period in China’s financial reforms and it faces an “arduous task” to dissolve the financial risks accumulated over many years and cope with challenges of WTO entry.