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China: Universal discussion puts focus on deregulation

Zhang, Bocom: “too many securities companies in China”

As China’s banks continue their rapid restructuring, government and regulators are already mapping out the future for the industry. “One word is becoming very important in China’s banking sector – deregulation,” says Zhang Jinguo, president of Bank of Communications (Bocom). “Banks in the west were talking about this in the 1980s and 1990s. We’ve been talking about this only since last year.” The People’s Bank of China, the mainland’s central bank, wants several so-called universal banks to emerge. That, say China bankers, means huge opportunities for mergers and acquisitions of banks and other financial services businesses such as securities firms and insurance companies.

“China’s GDP has already reached Rmb18 trillion [$2.2 trillion],” says a local investor. “That size of economy should be matched with several international-level banks. So the State Council wants to see consolidation and that’s going to be a major trend in the next few years.”

One senior M&A banker acknowledges the trend as inevitable but believes it might get moving in two to three years.

“They’re still trying to piece together what’s happening with all of these foreign investors,” he says, “but there’s no doubt that the second-tier and third-tier banks are going to be consolidated.

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