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With regard to quality of assets, rising NPL ratios and declining coverage ratios of US top five banks denotes that global financial tsunami has caused deterioration of assets quality and further depressed profitability of banking industry in USA. By contrast, NPL ratios of SOCBs decreased annually and coverage ratios of SOCBs have maintained increasing trend, hence the soundness of banking industry in China is stronger than USA.
5.2 Suggestions
Although the study results demonstrate amazing performance of banking industry in China for past few years, some suggestions still need to be given for China commercial banks on future operation course. Besides, ECFA has been signed by cross-strait governments; the study also provides advices about potential business opportunities for Taiwan commercial banks which prepare to invest in China.
1. Banking industry in China should have more of financial innovation
By analyzing composition of operating income of SOCBs, the proportion of net interest revenue accounts for major part of operating income which means banks in China highly rely on granting loans to customers and gain profit by interest margin.
On the contrary, most US top five banks have equal proportion of net interest revenue and other operating income, because financial development in USA is very advance, a variety of financial products and innovative financial services make banks in USA have more sources of profit than banks in China, as a result China government should make efforts to develop financial innovation.
2. Commercial banks in China should have balance-developed environment
Due to historical factors that most SOCBs were transformed from national specialized banks with large state-owned enterprises as primary customer base, under‧ 國
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China government’s protection merely the five SOCBs dominate more than half of total banking assets in China, and consequently serious monopoly problem and imbalance development are not good for banking industry.
3. Lending to SMEs and providing consumer banking services to Taiwan business people in China are two priorities for Taiwan banks’ investment in China in the initial stage
Banks in Taiwan have abundant lending experiences of SMEs loan and that are what commercial banks in China lacking in. Moreover, the number of Taiwan business people in China is over 800,000; it will be very convenient if Taiwan banks in China provide them with cross-strait remittance services and consumer banking services.
4. Development opportunities for Taiwan banks in China still need further negotiations under ECFA in the future
The signing of ECFA between Taiwan and China is a tremendous progress of cross-strait relationship. Nevertheless, the list of early harvest only shortens the time requirement for Taiwan banks’ entrance and allows Taiwan banking to establish specific institution to serve small enterprises, if Taiwan banks want to develop other kinds of business; it still needs our government to make further efforts to negotiate with China government.
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