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Corporate Banking in China

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20 January 2009
Hua Zhang

Abstract

Beijing, China 21 January 2009

: Opportunities for Entry

accounts for 53% of total banking revenues and 62% of profits. From 2004 to 2007, wholesale banking enjoyed an annual growth rate of 22%, and is expected to maintain a growth rate of around 24% from 2008 to 2010.

China's banking industry is currently dominated by wholesale banking services. However, the wholesale banking industry has been declining on yearly basis, largely due to the rapid development of the retail banking services, which account for 30% of banking services in China. At the existing growth rate, China's retail banking services shall exceed its wholesale banking services in five years.

The growth rate of enterprise lending in China is not high, but its proportion in the nation’s wholesale banking business remains large. During the period of 2002 to 2007, the growth rate was 13% for loan services. Corporate loan trends include a tendency to provide loans to small and medium enterprises, with a greater preference towards loans with high risks and returns; and the rapid increase of new loan products.

On the other hand, fee-based business accounts for a very small proportion of the wholesale banking business, but is experiencing rapid growth. Services achieving the fastest growth include cash management, which is increasing at a rate of 200% a many banks and 135% at ICBC; international settlement, which experienced an annual growth rate of 33% from 2003 to 2007; and financing business for institutional clients, which increased at a rate of 213% from 2005 to 2007 and is expected to reach RMB 648.4 billion in 2008.

In terms of the number of institutions in the banking industry of China, foreign-funded financial institutions, financial leasing companies and rural cooperative banks reported the fastest growth, with growth rates of 107%, 66.7% and 41.25%, respectively.

"The most popular way for foreign banks to move into China is to establish branch offices in China; purchase and hold the shares of domestic banks in China, and conduct business cooperation with Chinese banking institutions," says Zhang Hua, Celent analyst, as well as the author of the report.

The 60-page report contains 5 tables and 35 figures. A table of contents is available online.

of Celent's Corporate Banking research service can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.

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