A Research On State-owned Commercial Banks' Market Orientation Reform

Finance has been playing an increasingly important role in promoting both the economic and societal development with the deepening of economic reform. The level of financial development and the extent of financial deepening has thus become an important indicator of measuring the development of a nation's economy. And finance is thereby the core of the economic system. For this reason, financial system has become the nerve center or the adjusting mechanism of the national economy. Mr. Deng Xiaoping, the architect of China's economic reform, had once said when he visited Shanghai in 1991 that finance was quite important in modern economy, as that if finance is well managed, then everything else can be effectively managed.After 20 years' development since China's economic reform started in 1979, the Chinese financial system has been framed with the four state-owned commercial banks serving as the center, and the other banking or non-banking financial institutions being the complementary. The core element of the current financial industry's reform has been to deepen the reform with the aim of establishing a consummate market-oriented operating system and of reducing financial risks.In China, the role that non-banking institutions such as insurance, security and trust industry play has been less important than that of the banking institutions for its shorter period of development in the whole financial system. While in the banking industry, owing to historical and systematic reasons, the four state-owned commercial banks have actually monopolized the banking market. As commercialbanks are the basic platform through which the central bank can conduct its macro economic control, and the state-owned commercial banks serve as the center of the whole banking system, therefore, the results of financial reform will largely depend on the reform of state-owned commercial banks. It is the most urgent task to deepen and to speed up the market orientation reform for state-owned commercial banks in order to keep the stability of Chinese financial systems after the opening up of our financial market. So it is the objective requirement of China's economic development and social stability to keep a smooth and healthful development of the state-owned commercial banks, which is the core element of our financial system reform.During the third plenary meeting of the 16th CPC National Congress, there passed a decision of consummating certain aspects concerning the development of socialist market economy. The decision pointed out that the commercial banks ... should become modern financial enterprises with sufficient capital, strict internal control, safe operation and good service and profits; that qualified state-owned commercial banks should be chosen to conduct the corporate reform; that measures would be taken to dispose the NPLs and to enrich trie capital base; and that chances would be given to state-owned commercial banks to become listed in the security market. The decision also pointed that modern property right mechanism should be established; that property right which includes the substance right, the creditors' right, the equity right and knowledge property, will be the core element of proprietorship. The decision set the guideline, objective and potent theoretical support for state-owned commercial banks' reform.This dissertation is composed of eight chapters, the main contents and conclusions of each chapter are as follows:Chapter 1: Background analysis of the state-owned commercial banks' market orientation reformConsidering the inherent demand of modern commercial banks after the retrospect of the historical reform undertaken by the state-owned commercial banks, this chapter analyzes the necessity of such market orientation reform and puts forward the objectives to be achieved. A review of relevant theories concerning themarket orientation reform is also conducted in this chapter.Chapter 2: Disposing of non-performing loans (NPLs) and guarding against new NPLs by state-owned commercial banksConsidering the scale and cause of NPLs of state-owned commercial banks, and the disposing experience from both domestic and abroad, this chapter explores the methods to dispose NPLs, and measures on how to control the occurrence of new NPLs are thereby put forward after the analysis.Chapter 3: Capital and Capital Adequacy management of the state-owned commercial banksOn the basis of elaboration and analysis of the definition of commercial banks' capital and capital adequacy, this chapter suggests some concrete means to increase the capital adequacy ratio for state-owned commercial banks under the current context of capital adequacy status.Chapter 4: Reestablishing the organizational structure of the state-owned commercial banksConsidering inherent demand of commercial banks for the organizational structure, this chapter suggests a practicable scheme or organizational structuring for state-owned commercial banks on the basis of analyzing the status quo of the organizational structures of state-owned commercial banks.Chapter 5: Property right system reform of the state-owned commercial banksComprehensively considering the inherent demand for a reasonable property right system, this chapter puts forward some suggestions on commercial banks' property right system reform on the basis of a detailed analysis of the definition of property right and property right system, and the defects of the current property right system.Chapter 6: Establishing the Corporate Governance Structure of the state-owned commercial banksFrom the perspective of the definition, content and status quo of corporation governance, this chapter put forward some suggestions on how to build an effective corporation governance structure.Chapter 7: Reform of the Internal Control Systems of the state-owned commercial banksThe emphasis of risk management in state-owned commercial banks should be put on the management of the weaker internal control, as an inferior internal control will undoubtedly threaten the stable operation of commercial banks. Therefore, building a reasonable internal control system shall be the most urgent task for state-owned commercial banks to fight against risks.Chapter 8: Reform of External Supervision Systems of state-owned commercial banksA healthy risk management system shall incorporate both internal and external risk management systems. As for the case of state-owned commercial banks, the external risk management mainly comes from industrial discipline and external supervision. This chapter mainly covers the strengthening of external supervision on state-owned commercial banks.