Press Statement on China's Bank Reforms
Ray Brooks, IMF Senior Resident Representative
IMF Resident Representative Office
Beijing, China
January 9, 2004

Reforming China's banks is a top priority in deepening economic reforms in China. Considerable progress has been made in recent years in increasing the commercial orientation of the banks and improving prudential regulation and supervision. The plan to recapitalize the Bank of China and China Construction Bank announced on Tuesday is an important initiative in this area. And in discussions during the past week, the authorities have informed us that the recapitalization is part of a wider package of measures that will be necessary to reform these two banks.

The package builds on significant steps taken by the Bank of China and Construction Bank of China in recent years to improve their corporate governance and performance. While the details of this package are being worked out, we understand that further measures that will be taken include: an upgrade of internal management, more strict auditing requirements, more prudent provisioning for loan losses, and closer oversight by the supervisory authorities.

We welcome the determination of the authorities to carry out the reforms needed to strengthen the banking system and to put it on a sound financial basis. In particular, moving quickly on the restructuring of the big four commercial banks is of critical importance given the increased competition that China's banks will face as the country opens up its domestic market further to foreign banks as part of its WTO commitments.