Perhaps the two domestic industries that have yielded most reluctantly to market oriented reforms in China, the banking and petroleum industry, have recently shown encouraging signs of progress....
June 12, 2007 (Press Release) --
Perhaps the two domestic industries that have yielded most reluctantly to market oriented reforms in China, the banking and petroleum industry, have recently shown encouraging signs of progress. At the end of last month, and in the first application of China’s last, and arguably most important, WTO mandated banking sector reform, four foreign-owed banks were approved as locally incorporated entities. The much-anticipated reforms and their implementation effectively enable the foreign banks to operate freely in the Chinese marketplace and offer a nearly unmitigated range of financial service products without the former geographic, currency and client restrictions. Citigroup, one of the approved foreign lenders, has already announced robust plans to almost double its current number of branch outlets by the end of the year.
The laudable reforms and their successful realization should bring significant and tangible benefits to the Chinese banking sector, the average Chinese saver as well as local and foreign enterprises. As foreign banks establish China-based practices, their imported familiarity in developing sound credit cultures in line with international best practices will do far more for China than somewhat appease her foreign trading partners through greater market access and opportunities to rebalance their import/export ratios. Foreign commercial banks that loan and invest prudently, to maximize profit and in accordance with fundamental principles like creditworthiness, will nurture promising domestic enterprises, reward customers with favorable deposit rates and innovative financial options and, lastly, serve as a powerful competitive catalyst for China’s massive state-owed banks to relieve themselves of cumbersome, government-informed directives.
These banking reforms have further paved the way for China to more sincerely embrace an economic regime fueled by free, uninhibited competition and founded on the voluntary exchange of goods and services—empowering not stymieing the human inclination to create, initiate and invent. Progress on the petroleum front, though present, has been slower and measurably more sheepish.
While noting remaining obstacles and obvious contradictions in the market, Chinese media outlets have called the allowance of foreign oil wholesalers in the market de facto market regulation. This seems misleading. Though foreign enterprises may now apply for and putatively attain wholesale licenses, China’s tightly controlled pricing mechanism effectively precludes foreign entry. Upstream wholesalers cannot, on market terms, compete with China’s two vertically integrated, state-owed, petrol giants (Sinopec and CNPC). If the vast majority of the country’s supply is controlled by non-market-oriented firms that can—indeed are instructed—to import and retail petroleum products at losses, this is a marketplace entirely void of market forces.
Whereas banking reform initiatives have, since WTO accession, deftly provide
The laudable reforms and their successful realization should bring significant and tangible benefits to the Chinese banking sector, the average Chinese saver as well as local and foreign enterprises. As foreign banks establish China-based practices, their imported familiarity in developing sound credit cultures in line with international best practices will do far more for China than somewhat appease her foreign trading partners through greater market access and opportunities to rebalance their import/export ratios. Foreign commercial banks that loan and invest prudently, to maximize profit and in accordance with fundamental principles like creditworthiness, will nurture promising domestic enterprises, reward customers with favorable deposit rates and innovative financial options and, lastly, serve as a powerful competitive catalyst for China’s massive state-owed banks to relieve themselves of cumbersome, government-informed directives.
These banking reforms have further paved the way for China to more sincerely embrace an economic regime fueled by free, uninhibited competition and founded on the voluntary exchange of goods and services—empowering not stymieing the human inclination to create, initiate and invent. Progress on the petroleum front, though present, has been slower and measurably more sheepish.
While noting remaining obstacles and obvious contradictions in the market, Chinese media outlets have called the allowance of foreign oil wholesalers in the market de facto market regulation. This seems misleading. Though foreign enterprises may now apply for and putatively attain wholesale licenses, China’s tightly controlled pricing mechanism effectively precludes foreign entry. Upstream wholesalers cannot, on market terms, compete with China’s two vertically integrated, state-owed, petrol giants (Sinopec and CNPC). If the vast majority of the country’s supply is controlled by non-market-oriented firms that can—indeed are instructed—to import and retail petroleum products at losses, this is a marketplace entirely void of market forces.
Whereas banking reform initiatives have, since WTO accession, deftly provide
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