Are New Tigers supplanting Old Mammoths in China’s banking system? Evidence from a sample of city commercial banks

Co-operative financial institutions and local development in China

“…In rural areas, local rural credit cooperative members were pushed out and replaced by non-individual members at the county and provincial levels. Unsurprisingly, both institutions' main business shifted from providing loans to local co-operative enterprises, to instead supporting SOEs, small and medium enterprises, and government projects at the municipal and provincial levels (Ferri, 2009;KPMG, 2007;Zuo, 2001). Of course, this centralisation invariably meant a change from submunicipal to municipal/provincial developmental goals.…”

“…They have also been praised for having many of the same characteristics that were identified as the key strengths of urban credit co-operatives a decade earlier, such as superior local knowledge and diverse shareholders. Aggressive reforms have reduced the percentage of non-performing loans held by the urban commercial banks, which was one of the main justifications for consolidating the urban credit co-operatives in the first place (Ferri, 2009) and 11 others have applied to do so (Research and Markets, 2012). 17 Research has shown that local investment companies often invested stimulus funds in speculative activities, such as real estate and the stock market, which created bubbles (Martin, 2012).…”

“…As joint-equity institutions, urban commercial banks came under the control of new larger shareholders, such as the municipal governments, other government agencies (municipal and provincial), corporations and investment companies (private and stateowned). Moreover, individuals were no longer allowed to be shareholders (Ferri, 2009;Martin, 2012). Practically, this represented a shift in control from local communities to municipal and provincial-level actors.…”

The Development of the Chinese Financial System and Reform of Chinese Commercial Banks

“…Despite more than a decade of reform focusing on the SOBs, they remained disadvantaged because of their heavy burden imposed by the toxic assets and various political interferences. However, one study proposed that reason for the JECBs and CCBs outperforming the SOBs was also the result of their geographical location (Ferri, 2009). Rather than spreading all over the country, like the SOBs, they were more concentrated in the prosperous provinces.…”

Bank Non-Performing Loans (NPLS): A Dynamic Model and Analysis in China

“…It is known from the literature that these would have different probabilities of becoming NPLs (N). Ferri (2009) [13] reported that state-owned comercial banks burdened with non-performing loans from un-profitable state-owned enterprises from 1998-2005. Ferri (2009) [13] reported that reform of state-owned commercial banks is necessary to bring better banking to China.…”