Chinese depositors and companies seeking loans may soon find themselves presented with a longer list of options that also includes China's first batch of privately-owned banks.
China's banking watchdog said last month that five privately-owned banks, funded and operated by ten private companies are now effectively in the pipeline. The move is widely regarded as the latest follow-up to the plan announced by China's reform-minded Premier Li Keqiang which seeks to allow greater private capital involvement in the nation's profitable banking sector.
The ten investors include Chinese Internet giants Alibaba and Tencent, which have already been offering financial services in the form of Yuebao and Wechat payment, known as Internet finance in China. It is still not clear how these privately owned banks will affect China's banking business, but it is quite certain that competition will intensify and market forces will play a more significant role in the allocation of banking resources.
So how do industry insiders look at the prospects of privately-owned banks in China? What potential risks will these banks have to address in order to ensure their long-term success?
Ni Hao, you're listening to People In the Know, bringing you insights into the headlines in China, and around the world, I'm Zheng Chenguang in Beijing.
We speak to Winston Wang, Managing Director of Shipston Group Limited, an international private investment firm, and Rui Meng, Professor of Finance and Accounting at China European International Business School.
Academy of Management Proceedings
We explore the circumstances under which a non-family business (NFB) might adopt some of the characteristics of a family business (FB). We conduct an in-depth analysis of the recent developments at Infosys Technologies, a listed company that over its 32 year history had taken great pains to adopt the corporate governance characteristics of an NFB. In June 2013, the board made an announcement that seemed to move its corporate governance towards an FB model. We assess the pros and cons of such a transition for the interests of minority shareholders, who are considered most vulnerable relative to large block shareholders and managers. We also discuss why such a transition might take place and suggest the socio-emotional wealth of the founding families in their organizations as a possible explanation.