Clear visions for industry efficiency, better pricing, definition of risks amid others are what China needs for its development.
Clear visions for industry efficiency, better pricing, definition of risks amid others are what China needs for its capital market development, said Kevan Watts, Chairman of Merrill Lynch International Inc at the 18th China Daily CEO Roundtable on November 18 in Beijing.
The roundtable, with the theme "Capital Market Reforms - Visions, Process and Imperatives", involved senior officials from China Securities Regulatory Commission (CSRC) and China Banking Regulatory Commission (CBRC) together with some 30 CEOs and senior executives from global financial institutions.
"Financial systems dominated by banks cannot work anymore. They need to be more flexible and sensitive to prices and risks," said Watts, who has decades of extensive industry experience in Europe, the Middle East, Africa and the Asia Pacific and is also the honorary chairman for the roundtable.
He started discussions with an assessment of China's inherent financial systems structure. "A system based on banks is not sustainable. Financial services all over the world have revolutionized through information technology."
He quoted year-end 2004 figures to support his statement. "Only 2 per cent of financial assets in China was recorded in securities firms. About 4 per cent is owned by insurance companies. In 2004, the capital market industry as a whole lost 50 billion yuan in value and brokerage revenues dropped by 45 per cent. China's capital market is very small in size today."
The role of banks
Related: Banking Secter in China
Peter Schmidt, General Manager of Dresdner Bank AG Beijing Branch, testified to China's dependence on banks.
"Around 70 per cent of the finance of Chinese corporations involves Chinese banks. We need independence of Chinese corporations in banking."
Besides achieving a better balance with a less-bank-dependent structure, Norman Warner, President of Warner Financial Corporation in Canada, suggested channeling good-performance assets more efficiently.
"One area I see that needs improvement is the disposal of non-performing assets," Warner proposed.
"Instead of having a brand auction where they're auctioned in large blocks, it might be better to deal with the individual companies more carefully. Quite often, there is maybe only a small percentage of (the large blocks) that are of interest to the buyer, and the others are not dealt with as they could be."
Warner claimed the end product would be better for the market if more specialists were involved with disposal of the units. He said bringing in new management could be one step and he hoped to see many more products available for investors in 5 years' time. 1 2 3