China's Four State-Owned Commercial Banks: Ownership Reform And The Impact On Banks' Performance

China's banking section was characterized by vast government intervention, bad asset quality, and low capitalization, and began to reform since 1980s. Starting from 2003, China's four largest state-owned commercial banks initiated the ownership reform, which was mainly based on four pillars. The first was to clean up the non-performing loans and inject capital into banks, especially four state-owned banks, thus the banks were restructured. The second was to liberalize the financial market, including loosening the control on quantity and price and inviting foreign banks into domestic market. The third was to change the ownership structure and invite foreign investors into domestic banks. The forth was to enhance financial regulation and supervision, and improve the corporate management ability and transparency.Through the comparison based on the four state-owned banks' annual reports of 2003 to 2009 and the regression model to test the hypothesis of ownership structure, this paper mainly does research on the ownership reform's impact on four banks' performance. The banks'financial condition turns to be satisfying due to capital injection by the government, but there is no absolute positive relation between the improved financial condition and ownership reform. People should not be blindly optimistic about the reform achievements gained under mass government intervention and good macro economic growth. The banks' assets still face the risk of new non-performing loans. The financing needs, economic growth, opening up to the foreign banks, and China's long-term banking structure adjustment strategy all require four state-owned banks to continue reforming after successful IPO. The state-owned banks should find a balance point among national responsibility, social responsibility and commercial management, thus not only the healthy and stable banking system could be strengthened, the profit and efficiency of banks could also be improved. The continuing reform is the need to face the higher competition in the banking system as well.