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China Commercial Banking Report Q2 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: April 2008 Product Code: R302-3076 Description In March 2008, we updated all data for the 59 countries surveyed with official figures, sourced fromcentral banks and regulators. In most cases, we were able to find data that pertained to the end of 2007: inalmost all other cases, the data pertains to September 30 2007. As a result, the insights that we derive onparticular countries are based on consistently sourced information that is far more current than it had beenpreviously. Although we gather data for countries such as the US, Japan, Australia and the eurozone, the vastmajority of the 59 countries whose banking industries we survey are, or are generally seen as being,emerging markets. For all the widely publicised problems of large banks in developed countries, in thewake of the subprime banking crisis in the US, 2007 was an extremely good year for the banking sectorsof the emerging markets. In local currency terms, the median growth in assets was 21% (in Brazil). Themedian rates of growth in loans to non-bank customers and in deposits were 22% (in India) and 18% (inMorocco). In some countries - and not just those enjoying oil booms - the figures were spectacular. InUkraine, for instance, assets and deposits rose by 76% and 62% respectively. Loans grew by more thanone-third in Bulgaria, Estonia, Latvia, Lithuania, Romania, Russia, Serbia, Slovenia, Peru, Bahrain, Iranand Nigeria. Deposits also rose by more than one-third in most of these countries. In absolute terms, China’s banking sector enjoyed reasonable growth through the year to December 312007. In local currency terms, total assets, total loans and total deposits increased by 20%, 10% and 12%respectively. Of the 59 countries surveyed, China ranks 32nd in terms of local currency asset growth, 51stin terms of local currency loan growth and 43rd in terms of local currency deposit growth.As the tables above show, China’s rankings in terms of its loan/deposit, loan/asset and loan/GDP ratiosare 23rd, 41st and seventh respectively. All three ratios fell. This is in a country with per capita GDP ofUS$2,419, where deposits per capita are a high at US$3,982. In Q108, we envisaged that total assets, total loans and total deposits would rise by 16%, 16% and 17%annually through the 2007-2012 forecast period. Now, and using an improved forecasting method, we arelooking for growth rates of 15%, 12% and 12% respectively. Since Q108, we have calculated, on a consistent basis, a Commercial Bank Business Environment Rating(CBBER) for each of the 59 countries surveyed. The CBBER includes an assessment of the limits ofpotential returns: it does this by taking into account the size, growth potential and bancassurancepotential of the banking sector, as well as aspects of the economy in 2007. The CBBER also depends onan assessment of the risks to the realisation of potential returns: this reflects BMI’s assessments ofoverall country risk, together with the regulatory and competitive environment. China’s overall CBBER is 70.5. The equivalent figures for the US and the eurozone are 84.6 and 84.8,respectively. China’s CBBER is higher than most other countries in the Asia Pacific region, with theexception of Australia, Hong Kong, Japan, Singapore, South Korea and Taiwan. Within the CBBER, themost important aspect is the banking market structure element of the limits of potential returns. Thiselement accounts for 42% of the overall CBBER. China’s rating for this element - 87.5 - is very high byboth regional and international standards. It is also far higher than the country structure element of thelimits of potential returns (50.5). Additionally, the total assets of China’s banking sector relative to thoseof other countries, and the absolute growth in total assets and client loans during the 2007-2012 forecastperiod are very high. The CBBER highlights the factors that are holding back China’s banking sector. One is the relatively lowlevel of per-capita GDP (which is exacerbated by the uneven distribution of income). Another isbureaucracy. However, the most important constraint is the volatility of the economy over the long term.In 2007 China achieved a 14-year high rate of growth and this will prompt policymakers to move moreswiftly to slow the economy’s expansion. Table of Contents
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