Research On The Reform Of China’s Policy-based Banks’ Business Mode

As an important component of financial system, policy-based finance undertakes the responsibility to promote the stable operation of national economy. For many years, policy-based banks exit in various countries of the world, which play an indispensable role in its financial system. Since China’s three policy-based banks established in 1994, they are always playing an unreplaceable role in industrial reconstructuring, optimizing resources disposition, making up for the defects of market economy, promoting the stable development of national economy, infrastructure, problems about agriculture, ruralareas and peasantry and development of foreign trade.Since 2004, China’s policy-based banks’reform is ready to start after shareholding- system reforming of the state-owned commercial banks. In theoretical areas, some scholars have proposed the transforming, weakening of policy-based banks; but in practical, the commercialization transformation program of China development bank was approved by State Council in March 2008, China Development Bank Corporation was finally established on December 16th, 2008, which has also been the guide for the reform of Agricultural development of China and The export-import bank of China. The National Work Conference in early 2007 proposed, "deepen the internal reform, create conditions for the comprehensive reform", refered to the reform of Agricultural development of China and The export-import bank of China, that also leads to the replacement of policy-based business by commercial business. However, combine with our present and future development needs, "to remove policy function" does not comply with China’s basic national conditions. On macro level, economic and resources environment are restricting development of economy. The increased prices of oil, commodities, shipping have become a major international factor which constrains China’s economic development; lands, water, steel, iron, oil, gas and other resources in the world are at a low level. On micro level, capital supply gap is still exists on agriculture, ruralareas and peasantry, SME financing, infrastructure construction, regional development, reconstruction after disaster, reform of technology and independent innovation. They all need supports by the policy-based business. So it is very important to think about basic position, path of function adjustment, modes of operation, direction of future development, the reform of business modes of China’s policy-based banks.In this paper, beginning with economic growth theory, development economics and transitional economics theory, using the combination of theory and practice, qualitative and quantitative, learning from foreign countries’successful experience , the reform of business modes of China’s policy-based banks is studied systematically. Basing of the study of exsisting assets, liabilities and other businesses, analyzing the existing problems of China’s policy-based banks on external supervision, source of funds, investment of funds, risk management system, assets and liabilities. At the same time, Dupont analysis and Data Envelopment Approach are used, ROE, cost efficiency, technical efficiency, allocation efficiency, pure technical efficiency, scale efficiency and Malmquist index are chose to compare the operating efficiency of three policy-based banks. Try to find out the factors which lead to low efficiency, which are also the empirical basis for the reform of business modes of China’s policy-based banks.In the short term, policy-based banks are unsuitable for completely commercial transformation according to the current situation of China’s economic development and national conditions. What they should do is to commercialize operations of assets and financing businesses, broaden the scope of intermediate business, and strengthen the support of SMEs and "going out".In the long term, China’s policy-based banks should reform shareholding-system in the future. In order to reduce transition costs, with the principal to favorably optimize allocation of financial resources, fulfill the peaceful transition and sustainable development of policy-based banks, taking constraints that the banks would face in transition into account, on the basis of learning from foreign countries’successful experience in policy-based banks transition, several suggestions are given as follows: first, gradually transit to a low policy and diversified business model development; second, improve the corporate governance structure; third, combine the operation of policy-based business and commercial business;forth, remove government credit, keep the continuity of credit and liability.