Reform of Chinese State-owned Entities in Financial Sector

Abstract

There are 97 SOEs in mainland China by 2021, which control more than $80 trillion in assets. They control the resources of the country, play the buy-side roles in our economy, and contribute more than 40% in tax. However, these SOEs only generate less than 30% in new technologies and only 10% in new job opportunities. Even if they are successful in nominal numbers, they are inefficient with low profitability and a rigid management system. The big four banks in China are all Chinese financial state-owned entities. All of them are ranked on the list of the top ten banks all around the world. They are famous for the large scale of assets but poor financial performance and management problems of efficiency. A consensus agreement has been reached; structural reforms of these big banks are needed. However, these big four banks are not only profit-driven but also taking social responsibilities in terms of the system stability of the Chinese financial market. To unveil the truth behind the surface, this literature will illustrate the priorities of Chinese financial state-owned entities through historical analysis and make comparisons between them and American government-sponsored enterprises. Because there are many similarities between the establishment and development of Chinese state-owned entities and American government-sponsored enterprises, the American experience might indicate a clear path to the future development of Chinese SOEs.