June 30, 2007. -- The China Europe International Business School (CEIBS), in cooperation with CAIJING Magazine's Financial Series, held its first annual China Bankers Forum today at the CEIBS Shanghai campus. Entitled "Emerging Landscape of China's Banking Structure: Who Will Be the Winners?", the conference attracted more than 300 guests including experts from international and domestic banking corporations, government agencies, and academic institutions.
Renowned forum speakers included:
- Wu Xiaoling, Deputy Governor, People's Bank of China
- Jiang Dingzhi, Deputy Secretary of the CCP Committee, and Vice Chairman of the China Banking Regulatory Commission of PRC
- Wu Jinglian, Baosteel Chair Professor of Economics, CEIBS; Research Fellow, PRC State Council Development Research Centre
- Xu Xiaonian, Professor of Economics and Finance, CEIBS
- Stephen S. Roach, Asia Chairman, Morgan Stanley
- Fred Hu, Managing Director, Goldman Sachs (Asia); Co-Director, National Center for Economic Research, Tsinghua University
- Ma Weihua, President, China Merchants Bank.
The full-day 2007 China Bankers Forum covered five sessions:
- Session One: Development of the Chinese Banking Market in the Global and Domestic Context
- Session Two: Corporate Governance -- Key to China's Banking Industry Reform
- Session Three: Universal Banking -- Inevitable Trend for Banking in China?
- Session Four: Innovation -- Solution to Strategic Development of Chinese Banks
- Session Five: Global Banks in China -- Challenges and Opportunities.
To begin the conference, CEIBS President Zhu Xiaoming, who is also vice-chairman of the Standing Committee of the People's Congress of the Shanghai Municipality, and Caijing Magazine Editor-in-Chief Hu Shuli delivered the Welcome Address. In his speech, Zhu said the first annual China Bankers Forum, organized by CEIBS (one of the most prestigious business schools in Asia-Pacific region), has special significance: First, earlier in 2007, China fully opened its financial markets (in line with WTO accession terms), bringing a new level of internationalism and competition to the financial services field. Second, expectations are now high for Shanghai's development into an international financial center - a transformation that is being successfully undertaken against the backdrop of China's peaceful rise. Third, the finance industry has been a long-time focus for CEIBS and the school will actively develop further cooperation with corporate partners in the financial services industry going forward.
As the conference's first speaker, Shanghai Municipal Government Executive Vice Mayor Feng Guoqin said the forum coincides with the full opening of China's financial industry. He also stressed that China now has "great expectations" of developing Shanghai into an international financial center, and has made this goal a "top priority." He believes there will be "dramatic progress" toward this goal by 2010.
Feng welcomed banking professionals to contribute suggestions for the advancement of China's banking industry and for the development of Shanghai as an international finance hub.
Stephen Roach Delivers Investor's Assessment of China's Banking Sector
Renowned economist Stephen Roach, Asia Chairman for Morgan Stanley, then analyzed China's banking sector from the viewpoint of an investor. He said when he meets investors around the world, they usually ask two questions concerning China. First "What's a good stock tip?" and second, "How does Chinese banking reform fit into the broader contact of the development of the entire Chinese economy." He said he would address the latter question at this conference. He stressed that banking reform is "not an end in and of itself" but must be considered as part of China's broader movement toward developing a market-driven economic system.
Going forward, he urged China to remain a "high growth economy focused on quantity" but to also consider quality. He said China must make the "critical shift" from export driven to a consumer driven economy
He turned to a March 16 press conference at the National People's Congress, in which Chinese Premier Wen Jiabao warned reporters that China's economy is now: "Unstable, unbalanced, uncoordinated and unsustainable." Roach agreed that this assessment sums up the threats that China's economic growth now faces. He elaborated that the economy is unbalanced because 80% of China's GDP comes from fixed investment and exports. He urged China to place more emphasis on boosting consumer spending, which fell to a record low of 36% of China's GDP last year. He stressed that China's consumers consume too little while U.S. consumers err in the other direction. Another source of instability, he said, was China's "excessive demand for commodities." He pointed out that China consumes oil extremely inefficiently compared to global averages and he supported the Premiere's call to reduce oil usage by 20% by then end of the current Five Year Plan. Finally, addressing China's "unsustainable" characteristics, he urged the nation's leaders to protect the environment, especially air and water quality.
Last, he emphasized the positive aspects of China-U.S. trade relationship, warning that if the U.S. consumer fails, China will suffer. He stressed that he has recently testified to the U.S. congress three times on U.S.-China policy, warning the U.S. Congress not to "move down a slippery slope" toward imposing trade sanctions on China. Such a move, he said, would be a "massive blunder." He added that while no such legislation had passed in the past two years, "the odds are that something will pass this year."
Government Officials Offer Suggestions re Banking Reform
People's Bank of China Deputy Governor Wu Xiaoling gave a keynote speech entitled "The Reform of Commercial Banks -- A Long and Arduous Task." She discussed how state-owned commercial banks have made remarkable achievements in reform, including great improvements in financial positioning and initial achievements in governance structure. In particular, she detailed the progress of China's Big Four publicly listed banks. These four have recently seen improvements in profitability, return on equity, and other measures.
Wu also noted that the industry is now facing increasing pressure from competition and innovation. For example, pressure has heightened due to: rising revenue within the intermediary financial business sector, fierce competition within the individual credit market, plus stock price pressure and profit pressure.
Wu highlighted the challenges that commercial banks face as reform deepens. In order to perfect the governance structure, Wu believes it will be necessary to develop investment companies that operate according to market-based principles. This will require coordination between the bank management and its Board of Directors and the Board of Supervisors. Banks must also leverage the role of Party organizations, and blaze a trail of corporate governance with Chinese characteristics. In discussing effective corporate governance, she said: "I believe inadequate monitoring is not good, but too much monitoring is also not good."
Successful Chinese banks must also enhance their HR management and improve overall competitiveness, especially strengthening product pricing, accelerating organizational restructuring, and fine-tuning management practices.
Finally, she praised China's state-owned banks for recently making progress in competitiveness including offering international salary packages to executives and developing efficient, "flat" management systems and matrix-style organizational structures. She said such changes are positive steps, although more needs to be done to further internationalize state banks.
Offering a supervisor's viewpoint of the banking industry, Jiang Dingzhi, CCP Committee Deputy Secretary and Vice Chairman of the China Banking Regulatory Commission of the PRC, illustrated how China should learn lessons from international experience in order to develop competitive commercial banks.
CEIBS Professors Share Insight and Knowledge
At the 2007 China Bankers Forum, several renowned CEIBS professors will share their insight into the critical macro issues facing China's banking industry both in terms of the domestic arena and the global marketplace, as well as providing insight into how China can most effectively reform the banking industry in order to foster its development and internationalization.
Professor Wu Jinglian, Baosteel Chair Professor of Economics at CEIBS and a Research Fellow of the Development Research Centre of the State Council of PRC, delivered a keynote speech entitled "Economic and Policy Environments for the Development of China's Banking Sector." Renowned as one of China's leading economists, Wu shared how China's rapid economic growth and opening-up has lead resulted in the current need to accelerate banking sector reform and development. "A sound financial system is the life-blood of a nation's economy," he said. "If China is going to continue rising in the global economy, it needs banking reform."
Wu outlined the importance of four prerequisites for the successful development of China's banking industry. First, a stable macroeconomic environment. Second, the establishment of a reliable and effective social credit system and the opening up of the credit checking market. These actions will ensure rational competition among non-government credit checking institutions so as to meet the society's demand for accurate credit information. Third, a sound policy environment, including clear regulatory measures. Fourth, prudent and effective regulation, referring not to micro-managing the business activities of banks but focusing on truly critical laws and rules.
CEIBS Economics and Finance Professor Xu Xiaonian spoke on the timely issue of "Curbing Excess Liquidity Through Financial Reform." His presentation will stress that the key causes of excess liquidity in China are: the excessive savings funds in domestic banks, the uniform wealth accumulation in the market, and the undersupply of assets and financial products. Given this environment, financial institutions have not yet succeeded in turning savings into investments.
Xu also will stress that China's monetary policy can only curb excess liquidity through financial reform, specifically through the diversification of financial institutions and financial markets, non-governmental SME credit and trust institutions, private equity funds, and corporate bond markets. He will emphasize the importance of enterprises gaining decision-making rights in investment and financing.
Dialogue Between Domestic and Foreign Banking VIPs
2007 is a landmark year for foreign banks in China. Given China's newly opened financial markets, how can international banks face the challenges of changing government regulations, growing peer competition, and human resource shortages? How can domestic and foreign banks simultaneously compete with and cooperate with each other? The China Banking Forum will bring together a full roster of domestic and international banking industry leaders to discuss these issues.
Kicking off the presentations from top global banking executives, JP Morgan Case (International) President Andrew Crockett presented the story of JP Morgan's recent growth through following an "integrated bank model." In which the bank offers six distinct operational areas, covering both wholesale and retail banking.
Next, Banco Santander Executive Vice President and Advisor to the CEO Francisco Martin Lopez-Quesada shared his bank's rise to prominence over the past 20 years, from a worldwide ranking of 152nd in 1986 to 11th today, by following the opposite strategy to that of JP Morgan. Santander has remained focused on several core competencies as it has expanded into a global company.
China Merchants' Bank President Ma Weihua later highlighted the innovations underway at China Merchants Bank, covering three aspects: strategy, service, and management. ABN AMRO (Asia) CEO Jeroen. Drost discussed his company's strategies for achieving sustainable development and an innovative corporate culture. Goldman Sachs Asia Managing Director and National Center for Economic Research (NCER) at Tsinghua University Fred Hu and Citigroup China CEO Richard D. Stanley spoke on the current challenges and opportunities for foreign banks in China.
Finance Becomes a Strategic Focus for CEIBS
During the China Banking Forum, CEIBS President Zhu Xiaoming announced the establishment of the CEIBS-Lujiazui Group International Finance Centre. The center will focus its efforts on assisting in the development of Shanghai into an international financial center. The realization of the exciting goal can not be achieved without the concerted attention and participation and involvement from all society - this is the motivation behind CEIBS' efforts to establish this centre.
In the future, according to President Zhu, the International Finance Centre will showcase the expertise of CEIBS renowned finance professors Wu Jinglian, Xu Xiaonian and Zhang Chun. In addition, the centre will invite financial experts such as Ms Wu Xiaoling, Mr. Li Jiange, Mr. Gao Xiqing and Dr. Fang Xinghai as guest professors, and will regularly invite financial authorities speak. The goal of the new centre will be to offer a forum allowing experts to form a consensus in guiding the successful development of China's banking industry. Zhu will reveal that the finance-related employment opportunities for CEIBS MBA graduates this year increased by 94% over last year--an increase that demonstrates the strong needs for talents of the industry and the competitiveness of CEIBS graduates.
The China Bankers Forum Closing Address was delivered by CEIBS Executive President Pedro Nueno. Nueno emphasized that, in launching the first annual China Bankers Forum, CEIBS has shown its commitment to seriously discussing and studying the evolution of the major sectors of the Chinese economy. The new forum compliments CEIBS' existing Annual Auto Forum, Annual Health Care Forum, and new Annual Media Forum. Nueno stressed that the Chinese banking system has played, and will continue to play, a key role in the development of the Chinese economy. As with other sectors of China's economy, the banking sector will continue to restructure and to open to international competition. Nueno concluded by stating that the objective of the China Bankers Forum is to study how the Chinese banking system will evolve in the future and what role it will play in the global economy.
Finally, Nueno emphasized that the financial industry has become a key area of strategic and investment focus for CEIBS. As the top-ranked business school in Asia, the coming years will see CEIBS expanding its faculty roster of world-renowned financial experts, introducing more finance-related research and study programs, and developing and training more internationally competitive financial talents.
For more information, please contact:
CEIBS External Communications Director Laurie Underwood, (8621) 2890-5505 or lunderwood@ceibs.edu
CEIBS Communications Manager, Yuan Mei. (8621) 2890-5122 or ymei@ceibs.edu
