China’s banks and its bankers are totally different creatures than their Western counterparts, explains political analyst Victor Shih in Reuters. They not only closely follow the political line of the day, but are more politicians than bankers.
Despite all that, banks have reported strong earnings in the past year that often beat expectations. This may be a result of them putting less cash into the kitty to prepare for loans that may go sour.
“This is unlike the late 1990s when the government forced the banks to admit to a huge amount of non-performing loans. This time round, the strategy is just to not admit to NPLs,” said Victor Shih, a professor at Northwestern University in Chicago who has written a book on China’s financial system.
Many of the executives running China’s banks may have accepted salaries their Western counterparts would disdain in return for the future political appointments that may further their influence, said Northwestern’s Shih.
For example, the current governor of the Chinese central bank, Zhou Xiaochuan, and Vice Premier Wang Qishan were both previously head of CCB, the country’s No.2 lender.
ICBC‘s Jiang is rumoured to be in the running to head China’s bank regulatory commission, while CCB’s Guo is tipped as possibly the next head of the central bank, of which he was previously a vice governor.
“Many of them are aspiring politicians, and being a bank CEO is merely a stepping stone in their careers,” Shih said. “Thus, they are willing to accept lower pay.”
Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.
- China’s melting bank deposits – Victor Shih (chinaherald.net)
- Pay back time for the Beijing Olympics – Victor Shih (chinaspeakersbureau.info)
- Corruption stifles genuine entrepreneurship – Victor Shih (chinaspeakersbureau.info)
- Government should limit salaries SOE-execs – Zhang Juwei (chinaherald.net)