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Chinese banks: the bigger the better?

Quality-based, sustainable development is becoming more important

Green Space, Lujiazui Central, Shanghai, China

China’s leading banks have long been known for the financing and support that they have given to the growth of the nation’s economy. This has helped China to become the world’s second largest country in gross domestic product terms, at $18tn, or around 18% of the global economy.

In recent years, China has witnessed its own economic transformation and changes in the international economic and financial landscape. In this context, Chinese banks have been facing new issues like slowing economic growth and risky real estate market. Some prescient Chinese-funded banks are starting to seek ways to better balance scale and efficiency, and economic and social value.

The China Construction Bank is leading this change. The bank published its annual report on 2 April 2024. CCB’s revenue structure improved, with consumer finance, wealth management, transaction banking and other sources accounting for more than 65% of its total revenue. Other non-interest income amounted to Rmb36.8bn, with a sharp increase of 53% year on year.

Zhang Jinliang, chairman of CCB, said it is necessary to uphold the right perspectives of management, performance and risk and open up a path of high-quality development that is more efficient, more sustainable and safer. In terms of future expansion of asset scale and new business development, he said that CCB should be able to stand the test of a long period, give up undue emphasis on the rate and scale of growth and achieve steady, balanced, coordinated and sustainable development.

CCB also improved its operating efficiency through integrated operations and changes to its business structure. In the past year, CCB issued new loans and advances totalling Rmb2.7tn and invested almost Rmb1.1tn in new bonds. The financial resources mainly flowed to sci-tech innovation, advanced manufacturing, inclusive finance to micro and small businesses and green finance. CCB showed impressive leadership in these areas.

In the face of the new economic situation, China’s state-owned banks are gradually transforming to a more quality-based and sustainable mode of development, instead of adhering to the traditional idea ‘the bigger the better’.

Financing the digital future

CCB resolutely served the technology and finance sectors, made use of innovative evaluation tools and continuously increased financial support for technology companies. Science and technology loans amounted to Rmb1.5tn, up by 24%.

It vigorously developed digital finance and helped promote the integration of the digital and real economies. The balance of loans to core industries of the digital economy amounted to nearly Rmb700bn.

Making China’s real economy more sustainable

At the end of 2023, CCB’s green loan balance amounted to Rmb3.9tn, an increase of Rmb1.1tn, or 41% over 2022. The bank allocated more financial resources to green and low-carbon industries: the balance of renminbi green bond and foreign currency green bond investment increased by 70% and 117% respectively over 2022. It focused on the investment and financing needs of transformation and diversified green financing channels.

In 2023, CCB underwrote 36 tranches of green debt financing instruments for non-financial enterprises, with a volume of Rmb29bn. It also issued multiple tranches of green bonds, with an amount equivalent to more than Rmb24bn. CCB Principal Asset Management held green bonds amounted to Rmb2.5bn and made a total of Rmb27.6bn of equity investment in multiple industries such as clean energy, energy conservation and environmental protection, clean production and infrastructure green upgrading.

CCB Financial Leasing continuously increased the size and proportion of its green assets, with the green leasing assets amounting to Rmb47.3bn, the proportion of which in the general leasing business increased by almost 9 percentage points over 2022.

Promoting cross-border trade and the role of the renminbi

The bank pressed ahead with renminbi internationalisation. In terms of helping finance open to the outside world at a high level, trade financing reached Rmb1.8tn, and cross-border renminbi settlement exceeded Rmb4tn in the whole year. It promoted the construction of an overseas renminbi market, and CCB London Branch continued to be the largest renminbi clearing bank outside Asia with a cumulative clearing amount of over Rmb87tn.

Advancing financial inclusion

CCB increased its efforts to provide services for small and medium-sized enterprises to support the development and growth of the private economy and private enterprises. CCB maintained its position as China’s largest financial institution in terms of inclusive finance, with inclusive finance loans reaching over Rmb3tn, now extended to more than 3m customers.

The group continuously surrendered profits to support the real economy, and the interest rate of inclusive loans newly granted to small and micro businesses in 2023 was 3.75%, down 0.25 percentage points from 2022.

Continued support for China’s corporations

The bank further enhanced support of corporate loans for the real economy. At the end of 2023, CCB’s domestic corporate loans amounted to Rmb13.2tn, an increase of Rmb2.2tn or 20% over 2022, with a non-performing loan ratio of 1.9%.

Loans to infrastructure sectors such as transportation, electric power and water conservancy maintained rapid growth. Loans to the manufacturing industry amounted to Rmb2.7tn, an increase of Rmb459.6bn or 20% over 2022. Loans to private enterprises amounted to Rmb5.4tn, an increase of Rmb951.2bn or 21% over 2022. Loans to strategic emerging industries totalled Rmb2.2tn, an increase of Rmb768.1bn or 52% over 2022. Loans to sci-tech enterprises amounted to Rmb1.5tn, an increase of Rmb296.9bn or 24% over 2022.

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