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 Total assets and total liabilities 

Table 13 the assets of foreign banks in China (2003-2007)

2003 2004 2005 2006 2007

Assets (RMB 100 million) 4,159 5,823 7,155 9,279 12,525

Share of the total banking assets in China (%) 1.5 1.84 1.91 2.11 2.38

Liabilities (RMB 100 million) 3,751.4 5,329.1 6,530.1 8,531.6 11,353.0

% of the total banking Liabilities in China 1.4 1.7 1.8 2.0 2.2

Suorce : CBRC 2007

In 2007, the total assets of foreign banks were 2.38% of total banking assets in China, this figure were small proportion of total banking assets, however, the amount reached the RMB 1,252,500 million; moreover, this figure was steady increased. The total liabilities of foreign banks in China were increased as same as total assets of foreign banks.

 Profit before tax 

Figure 5 Profit before tax of foreign banks in China (2003-2007)

RMB 100 million 

Source : CBRC 2006, 2007 annual report

The profit before tax of foreign banks was steady increased, compare with the previous years. This can know the foreign banks performance well. In these number, there were one problem need mention. This number including the all the foreign banks in China, however, every year, the number of the foreign banks were different, so this figure was not accurate.

 The NPLs of foreign banks in China

Table 14 foreign banks in China 2006-2007

Unit: RMB 100 million, %

2006 2007

Outstanding balance of NPLs 37.9 32.2

Substandard 21.6 20.4

Doubtful 9.3 7.7

Loss 7.0 4.1

Share in total loans 0.8 0.5

Substandard 0.4 0.3

Doubtful 0.2 0.1

Loss 0.1 0.1

Source: CBRC annual report 2007

The NPLs of the foreign banks in China was very less, it achieved the international standard level 8 percent. The reasons of this is the foreign banks in China’s open the all business only in few years, the risk management of the foreign banks have the advanced management framework, so they can control the risk very well. In addition, compare with the NPLs 2006, the NPLs of foreign banks were decrease 0.3%.

6.5 Chapter summary

This chapter described the historical developing process and analyses the current circumstances of foreign banks in the Chinese financial market. After China’s entry into WTO, the foreign banks enjoy national treatment as same as the domestic banks. Faced the domestic banks become stronger and the foreign banks also have some strategies to expand their business. Domestic banks and foreign banks will face to drastic competition. Next chapter will use the two case studies (one is CCB, another one is HSBC) to compare the operation and performance between the domestic banks and the foreign banks.

Chapter seven Compare and contrast between domestic banks and foreign banks

7.1 Introduction

In Chinese banking system, the domestic and foreign banks are main roles. In this system, these two types of banks face the same situation, they will use the different way to solve, and they use the different strategies to compete with each other, gain market share. This chapter will use the case study to analysis, understanding who is the winner in Chinese banking market.

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