Banking in China 2.0

Elliot Wilson
Published on:

Two banking upstarts are resetting the relationships the Chinese have with their boring old state lenders by being convenient and readily understood. Even better, they pay great rates. But the incumbents aren’t taking this new threat lying down.

China, a land infamous for dynastic and cultural revolutions, is finally undergoing the financial revolution its bustling, vibrant, modern economy has long needed. The changes that have taken place in the world’s second-largest economy over the past 12 months have been both seismic and startling.

Last year, China’s new leaders launched the Shanghai free-trade zone, modelled on Hong Kong’s free-port system, and relaxed lending rates. Already this year, the nation’s currency, the renminbi, has started trading more freely – a big step towards the liberalization of interest rates, which top leaders, including premier Li Keqiang, see happening as early as 2015.

On March 11, Zhou Xiaochuan, governor of the People’s Bank of China, predicted that bank deposit rates would be liberalized "within one or two years", most likely in 2016 – faster than even the most bullish analyst had expected. That month...