• Add to Favorites
  • Subscribe
  • Friend us on Facebook
  • Follow Caijing on Twitter

Chinese Banks Contribute 70Pct of Profits in Services, Raising Concerns over Structural Imbalances

09-02 13:46 Caijing
Banks' profits have grown rapidly from 58 percent in 2009 and 68 percent in 2013, as a share of total profits in services.

Extra-high profitability in Chinese banks, most of which are state-owned or state-backed, has raised concerns about structural imbalances in services, a sector that has been attached much importance in steering a growth model away from exports to consumption.

Chinese banks have generated nearly 70 percent of profits in total among the top 500 companies in services, although the number of banks only accounts one tenth of total, a report issued by the China Enterprise Confederation (CEC) over the weekend showed.

Evidence is clear that China's service sectors, especially companies in the modern services like banking and insurance, are becoming a prominent corporate profit driver in China, according to the Analysis About China Top 500 Companies in 2013.

While Chinese manufacturers have reported a year-on-year decline of 17.47 percent in net profit so far this year, profits in top 500 companies in services rose slightly in total despite a slowing economy, the report showed.

Operating revenues are even stronger for services, according to the report, with the top 500 companies embracing a growth of 15.13 percent compared with the same period a year ago, eclipsing that of top 500 manufactures for the first time.

Digging into the services, meanwhile, modern services like banking and insurance have for the first time in history contribute more than half in percentage of numbers.

The banks, with their numbers accounting for only 7.8 percent of top 500 in services, have contributed 67.5 percent of total profits.

On the face of it is evidence of huge breakthrough of overall economic restructuring, but a deeper look into the figures could uncover trails of structurally-imbalanced development in the sector, the People's Daily said in a today's report.

The dominance of Chinese banks is "extremely abnormal" that demands imminent adjustment, the report said, quoting Li Jianmign, vice president of the CEC.

According to Li, signs of the banking's dominance emerged a decade ago, but it is in recent years that the position has been strengthened. Banks' profits have grown rapidly from 58 percent in 2009 and 68 percent in 2013, as a share of total profits in services.

But even more alarming is that the banking advantage does not necessarily mean strong financial sector in the country, according to Li. Only eight insurers and three brokerages made their names onto the top 500 list in services, with their combined profits at merely 32.4 billion yuan.

Manufactures are even more lagged behind compared with banks in profitability. Profits of 268 manufacturing companies are equivalent to less than 57 percent of profits made by the country's five biggest state-owned banks so far this year, according to the report.

"The deviation between banks and the real economy has been expanded since 2007, nudging more manufactures out of the list [of top 500 enterprises]," Li was quoted as saying.

More about the story in Chinese: http://economy.caijing.com.cn/2013-09-02/113244981.html

Editors’ Picks »