China may break up State Bank Monopoly

Gordon G. Chang, Contributor

I write primarily on China, Asia, and nuclear proliferation.

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4/08/2012 @ 4:33PM |1,924 views

Why China Wants to Break Up Its State Bank Monopoly

 

On Tuesday, China’s premier suggested that momentous changes were coming to the country’s financial sector.  “Frankly, our banks make profits far too easily,” Wen Jiabao said on state-run China National Radio.  “Why?  Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital.”  China’s top economic official then made a startling suggestion:  “That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly.”
Investors reacted sharply, dumping stocks of major Chinese banks.  Analysts, however, began to hope that Beijing would undertake major restructuring of the economy, especially because Wen’s words followed the State Council’s March 28 decision to declare Wenzhou a “general financial reform zone.”  In the city, known as China’s “cradle of private enterprise,” private parties will be able to invest in local banks and to establish financial institutions such as loan companies and rural community banks.
The State Council, China’s cabinet, also said recently that it will relax various restrictions on the transfer of funds in and out of the country.  The series of announcements upends the generally accepted notion that reform must wait for the handover of power to a new set of leaders and, at a minimum, shows that economic reform has become a matter of public debate.  Some are even more optimistic, arguing that the premier is pushing economic reform as a means of achieving political reform. end quote from:
http://www.forbes.com/sites/gordonchang/2012/04/08/why-china-wants-to-break-up-its-state-bank-monopoly/

If China wants to end its bank monopoly it appears that the world financial crisis has finally hit home in China. Inflation is causing problems and the Communist party needs to deflect attention away into some other cause. Whether it will be successful or not in deflecting blame is anyone's guess at this point. However, every major sector of the world economy has been hit with different aspects of the Worldwide "Great Recession"  in today's Globalized economy, "What affects one eventually affects all nations in one way or another." It has been said by economists worldwide that the U.S. would be the first major economy to come out of the Great Recession. But because of the weak recovery caused by high oil prices, high food prices and almost high for everything prices, this will be a different and maybe jobless recovery all over the world, even eventually in China, which could be problematic for China because so much of its population is already in poverty for hundreds of years. Though 300 million or more have a life style similar to Europe and the U.S. and Japan and some other countries the rest (1 billion people) do not. This has always (for thousands of years) made it difficult to keep such large populations under the same rule. So, China's solution will look much different than other nations solutions.