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Panoramaic Analysis of China Financial Industry, 2007-2008

Published: Apr/2008

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A Panorama of China Financial Industry is divided into three volumes. The first volume, composed of Chapter 1-11, mainly studies banking sector, the second volume, consisting of Chapter 12-29, studies security sector and insurance sector, and the third volume, comprising Chapter 30-52, studies other financial institutions. This report covers all the sub-sectors of China's financial industry, makes an elaboration of the financial industry from the perspective of policies and regulations, competition pattern, development of the industry, key companies, foreign investment trend, future development and investment opportunities, and makes an in-depth analysis of China's financial industry. We hope this report could offer you valuable reference and consulting.

China's financial system is a typical bank-based financial system. Banking industry, especially the five big state-owned commercial banks, holds an absolute dominant position in China's financial system. Before 2005, the ratio between indirect financing and direct financing was constantly kept at about 9:1, but in 2006 the ratio was around 7.7: 2.3. With the progress in the non-tradable shares reform of the state-owned listed companies, China's capital market has had an exponential expansion since 2006, making financial instrument more diversified and financial assets grow rapidly.

China has primarily established a relatively sound financial system with commercial banks, securities firms, insurers and fund companies as the mainstay.

Comparison between Total Assets of the Major Four Financial Institutions, 2007
(Unit: CNY trillion)
 
Source: ResearchInChina

In accordance with the classification by China Banking Regulatory Commission, the domestic banking financial institutions include policy banks, state-owned commercial banks, national shareholding commercial banks, urban commercial banks, rural commercial banks, rural cooperative banks, urban credit cooperatives, rural credit cooperatives, postal savings banks, foreign capital  banks and the non-banking financial institutions, such as auto financial lease companies.

By the end of 2007, the total assets of the five state-owned banking giants have reached CNY28 trillion, amounting to 53.2% of the total assets of all banking financial institutions and those of national shareholding commercial banks and urban commercial banks have come to CNY7.24 trillion and CNY3.34 trillion respectively. Meanwhile, the combined debts of the five state-owned commercial banks have reached CNY26.4 trillion, amounting to 53.3% of the total held by all commercial banks.

Assets of Banking Financial Institutions, Sep., 2007

  
                          Source: China Banking Regulatory Commission

Note: Non-banking financial institutions include finance companies of conglomerates, trust & investment companies, financial lease companies, auto financial companies and money brokers.

By the end of 2007, China has had 1,550 domestically listed companies (A.B share), an increase of 116 companies against the previous year and the total market value has reached CNY32.71 trillion, of which CNY9.3 trillion was the market value of circulating shares, representing an increase of 2.66 times and 2.72 times respectively. Meanwhile, the total equities have reached 2.24 trillion shares, an increase by 751.93 billion shares, amounting to one third of total equities. In 2007, the total annual turnover of the two stock markets reached more than CNY46 trillion, up 89.63% year on year or an increase of CNY1.37 trillion.

Stock Turnover, Dec.2006-Dec.2007

  
Source: China Securities Regulatory Commission

By the end of 2007, China's total fund size has reached more than two trillion shares and net value of funds in China totaled CNY3 trillion, an increase of three times over the end of 2006 and fund account holders have surpassed 110 million. Up till now, fund investment has accounted for 28% of the market value of circulating shares in the two stock markets.
 
By March 27, 2008, China has created eight insurance group companies and has had 109 insurance companies, of which 55 are invested by Chinese companies and 54 are either joint venture insurers or exclusively foreign invested insurers. Meanwhile, China has had 2,747 insurance agencies. China has basically established a relatively perfect insurance system with features of more reasonable allocation of resources, fair competition and mutual development

Number of Insurance Companies

 

Source: China Insurance Regulatory Commission

Besides banking, securities and insurance industries, China also has other types of financial institutions, covering equity investment, guaranty, trust, pawn and financial lease industries. In the past few years, these institutions have had a rapid development. The investment of China equity investment industry totaled USD534 million only in 2002 and the figure rose to USD2.18 billion in 2006. China had 966 guarantee institutions in 2003 and the figure had already jumped to 3,366 by the end of 2006. The number of domestic pawn companies also increased to 2,342 in June, 2007 from 1,375 in 2004.

Fund Raised by Private Equity Funds in Each Quarter Which Could Be Invested in Mainland China,
2006-2007 (units: USD one million)
 
Source: ResearchInChina

In 2007, China had 628 aggregated trust products, up 11.35% against the previous year, among which, 455 went to the financial field, accounting for 72% of the total, meanwhile, issue size of the trust products reached CNY105.44 billion, up 73.93% against the previous year. CNY167.9 million trust products were issued on average in 2007 and the average trust duration was 2.23 years, up 56.2% and 11.5% year on year respectively against the previous year. The average annual yield in the year was 2.16 percentage points higher than the previous year. 


Changes of Issue Size and Average Size of Trust Products Issued in 2007
 
 Resource: ResearchInChina
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