The Restrictive Factors And Its Corresponding Solutions Of Phased Profitability Of Chinese Commercial Banks

Profitability is a core indicator for commercial banks to keep and improve the competitiveness and capability of sustainable development. First class commercial banks require first class profitability and vice versa. Otherwise, the construction of world class banks with international competitiveness can not be achieved. The reform history of Chinese commercial banks is also the history to improve profitability. Although the reform of Chinese commercial banks initiated in 1994, the real reform actually began in 1998 during the Asian financial crisis. After the first phase of reform from 1998 to 2002 as well as the organization of the first administration in 2003, the reform to convert state-owned commercial banks to stockholding corporations was put into agenda. On December 30, 2003, the country started to invested US$45 billion foreign currency reserves to Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB), which symbolized the initiation of the second stage of reform.The complete opening-up of Chinese financial industry to foreign banks on December 11 in 2006 forced home commercial banks to improve the profitability, aiming to completely keep and enhance their own competitiveness and the capability of sustainable development, which therefore enable them to compete with foreign financial giants. However, under the realistic situation, there exist many restrictive factors and obstacles for Chinese commercial banks to achieve the expectation to improve the profitability. Based on the introduction to the first two stages of commercial bank reform, the dissertation analyzes the factors which restrict profitability of commercial banks and explores the corresponding solutions. The dissertation is arranged as follows:Firstly, the theoretical foundation of analyzing the profitability of commercial banks is introduced primarily, involving its method, the principles and basic elements of affirming analysis framework, which are defined at the same time considering the specific application to Chinese commercial banks.Secondly, the restrictive factors of phased profitability of Chinese commercial banks are explored on the basis of the contrastive analysis of the profitability during the first and second stages and the comparison of profitability with developed banks in America.Finally, based on the analysis of the current problems of the commercial banks' profitability, the dissertation puts forward the corresponding solutions such as regulating the internal controlling mechanism by way of reforming the property rights system, establishing the advanced operating idea through the improvement of creativity, transforming the operating mode to enhance profitability, and improving the quality of employees to avoid personnel risks. Finally, reasonable suggestions are proposed for the future operation of Chinese commercial banks.