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China

Is China Finally Ready For Private Banks?

"In terms of regulations, there is nothing forbidding the formation of private banks in China"
"In terms of regulations, there is nothing forbidding the formation of private banks in China"

-OpEd-

BEIJING - In the past month, China's State Council, Central Bank and Banking Regulatory Commission have all encouraged restructuring and reforming the nation's financial institutions with private capital so that banks can take their own risks. Though the aspiration to establish private banks isn't new, the fact that a number of top Chinese institutions are promoting the idea suggests that it may soon actually happen.

In terms of regulations, there is nothing forbidding the formation of private banks within China's commercial financial system. That is to say that, technically, there is no obstacle to founding them. But they have failed to emerge because the regulatory requirements for funding and investment ratios are much too harsh. This is despite both governmental policymaking and propaganda supporting their creation.

In recent years, China's regulatory authority has been vigorously promoting rural banks, but financial capital from private investment shouldn't be limited to the rural market. That only makes it more difficult to mobilize further private capital.

And there are also basic problems of perception that block progress. Just the phrase "private bank" arouses debate. Some believe that they are financial institutions that serve only private enterprises, whereas others think they follow the corporate governance model.

A bank is a bank

We believe that the definition of "private banks" is not important, and that it is not the place of the the government or regulatory institutions to define them. Banks initiated with private capital should not be regarded as somehow fundamentally different in function from other banks.

The division of banks should be according to the existing systems of sole proprietorship, cooperation or joint-stock, and should compete under the same regulatory guidelines. The government should establish the basic regulatory framework and legal environment for the financial sector so that all banks can fairly compete, and the best ones can thrive. The so-called "private banks" shouldn't enjoy any special policy. What they need instead is a level playing field so that private investors are willing to participate enthusiastically and have total operational autonomy.

The future economic development of China depends on mobilizing more private financial resources and promoting the entire banking sector's efficiency. The vast majority of Chinese commercial banks are administratively heavy. High-ranking executives in Chinese banks are both managers of the banks and administrative officers, and it's difficult for such a system to nurture real career bankers.

A banker is someone who manages financial assets as a profession in pursuit of maximizing value. They can use their wisdom and creativity to promote financial innovation, and correspondingly they can also take the same risks as commercial banks. This surely would mean prosperity for the entire banking industry -- and the birth of "banker" as a real career path.

China's financial industry has entered a critical stage of the internationalization of its currency (the RMB), the marketization of the interest rate, and a broader economic transformation. Allowing private capital to cultivate true local bankers is now imperative. Finance is the core power of a market economy, and it needs more diverse services provided by banks and professionals who can enhance the Chinese banking industry.

As Liu Mingkang, former chairman of the China Banking Regulatory Commission says, "They have internal power and external edification so that they can change the old world and project entrepreneurial spirit."

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Geopolitics

Utter Pessimism, What Israelis And Palestinians Share In Common

Right now, according to a joint survey of Israelis and Palestinians, hopes for a peaceful solution of coexistence simply don't exist. The recent spate of violence is confirmation of the deepest kind of pessimism on both sides for any solution other than domination of the other.

An old Palestinian protester waves Palestinian flag while he confronts the Israeli soldiers during the demonstration against Israeli settlements in the village of Beit Dajan near the West Bank city of Nablus.

A Palestinian protester confronts Israeli soldiers during the demonstration against Israeli settlements in the West Bank village of Beit Dajan on Jan. 6.

Pierre Haski

-Analysis-

PARIS — Just before the latest outbreak of violence between Israelis and Palestinians, a survey of public opinion among the two peoples provided a key to understanding the current situation unfolding before our eyes.

It was a joint study, entitled "Palestinian-Israeli Pulse", carried out by two research centers, one Israeli, the other Palestinian, which for years have been regularly asking the same questions to both sides.

The result is disastrous: not only is the support for the two-state solution — Israel and Palestine side by side — at its lowest point in two decades, but there is now a significant share of opinion on both sides that favors a "non-democratic" solution, i.e., a single state controlled by either the Israelis or Palestinians.

This captures the absolute sense of pessimism commonly felt regarding the chances of the two-state option ever being realized, which currently appears to be our grim reality today. But the results are also an expression of the growing acceptance on both sides that it is inconceivable for either state to live without dominating the other — and therefore impossible to live in peace.

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