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China Research and Intelligence: Report of the Mixed Operation of Chinese Financial Industry under International Financial Crisis, 2009

In the later 20th century, there occurred two events with historic meaning in international financial management history. One was the breakdown of the Bretton Woods System. The other was the limitation laws of the mixed operation in the financial industry were banned in many countries. From then on, the international financial industry step into a new era.

 

With the advancement of information technologies, information sharing has become a trend, which inevitably led to the dim boundaries among the commercial banks, investment banks, securities business and insurance business. Meanwhile, with the speed-up of the financial globalization, floating of the international capitals in large scale, the cross-country development of the financial business and organizations and the development of the international financial market, the commercial banks adopted the mixed operation to cast for the globalization trends.

 

The so-called mixed operation in the financial industry refers to the business integration, permeation and cross among the banks, securities companies, insurance companies and trust companies, which breaks through the boundary in the separated operation models. The mixed operation model was derived from the universal banks in Germany and then followed by the financial industry of America, Europe and Japan etc, propelling the development of the financial creativity and the financial venture management.

 

The customers’ comprehensive demands for the financial services promoted the financial industry to change the old and single operation concepts. Apart from the traditional financial businesses, such as deposits, loans and settlement, the demands for insurance, funds, bonds and stocks were also increased. They hoped to obtain “one-station” financial services, namely, variety financial services in a financial organization, which required Chinese financial industry to carry out the mixed operation and gradually propel the financial creativity so as to meet the customers’ demands.

 

After the entry WTO, Chinese financial market was further opened, the mixed-operation-dominated multi-national financial groups step into Chinese banking, securities business and insurance business through various channels. It is the inevitable trend for Chinese financial industry to develop towards the mixed operation.

 

From the aspect of Chinese banking, the inner requirement for the mixed operation has been appeared. The slowdown of the deposit and loan growth in Chinese banks, the reduction in the margin profits, especially the release of the opened funds, has stricken the deposit business in the banks. The separated operation, however, led to the margin as the major revenue structure and asset structure in the commercial banks, which could not be easily cut down the operation venture by variety businesses. The mixed operation could make the financial organizations to form more new profit growth points, optimize the business revenue structures and realize the venture carriers.

 

American financial crisis, ignited by the sub-prime mortgage crisis, has seriously affected American financial industry. Many leading financial organizations were crashed or be merged. Therefore, the domestic attentions focused on the financial venture supervision. Many people began to doubt the financial creativity and the mixed operation model in the financial industry. As a matter of fact, there was no wrong for the mixed operation itself. The problem lied in whether the financial supervision model could adapt the mixed operation. The major source of American financial crisis was the great insufficiency in American financial supervision systems. Therefore, the international financial crisis could not suspend the process of the mixed operation in Chinese financial industry, but to provide development experiences and lessons for the mixed operation in Chinese financial industry.

 

At present, Chinese separated supervision systems were set up in 1993, taking the establishment of China Banking Regulatory Commission in 2003 as the complete mature sign. With the gradual perfection of the separated operation and the separated supervision systems, some financial organizations, including some non-financial organizations in the traditional sense, such as China Ping An Insurance (Group) Company Limited, China Everbright Group, CITIC Group, Haier Co., Ltd and Shandong Electric Power Company etc, were engaged in the financial mixed operation in various means and the supervision organizations acquiesced. 

 

With more than 20-year financial system reform, China has basically set up the financial organization systems, the financial market systems, the financial control systems and financial supervision systems, laying a foundation for Chinese financial industry to develop from the separated operation to the mixed operation. According to the present situation of the coexistence of the mixed and separated operation at present and the predominance of the separated operation, with the competitive advantages of the mixed operation in the financial organizations, it is inevitable to cross, create and mix in the financial business. 

 

More following information can be obtained in this report:

- Development Environments of the Mixed Operation in Chinese Financial Industry

-Present Development Situation of Chinese Banking

- Present Development Situation of Chinese Insurance Business

-Present Development Situation of Chinese Securities Business

-Present Situation of the Mixed Operation in Chinese Financial Industry

- Distributions of International Financial Giants in China

-Influences of International Financial Crisis on the Mixed Operation of Chinese Financial Industry

 

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