Research in CRM of Chinese RCBs is in scarcity. This research attempts to develop a CRM framework for Chinese RCBs. The framework incorporates main factors that affect credit risk facing RCBs in relation to environmental, operational,financial and guanxi variables contributing to failures of SMEs and farming households, the main customers of RCBs in China. The framework outlines the procedure that RCBs can follow to develop its own credit risk analysis model in accordance with their portfolios of loans and the characteristics of their customers. This paper is organized as follows. The next section introduces China’s banking reform and the development of China’s RCBs. The third section provides a literature review on CRM. The fourth section analyses factors contributing to failures of SEMs and farming households and proposes a CRM framework for RCBs in China.
The final section concludes the paper and highlights the limitations and future research directions vertical hydroponic nft system. China’s banking reform was carried out within the broader context of China’s transition from a planned economy to a market economy. Prior to the beginning of the reform, China’s banking system consisted of only one financial institution,the People’s Bank of China. The “first stage” of the banking reform took root in the early 1980s by creating a two-tier bank system. The PBC became the central bank. The Industrial and Commercial Bank of China was carved out of the PBC and, together with the China Construction Bank , Bank of China and the Agricultural Bank of China , the four so-called specialized banks became the second tier of the system. The Big Four banks were100% state-owned. In the early stage of reform the specialized banks were allowed very little scope to extend commercial or consumer credit.
The second stage began in 1994 when the Big Four banks were relieved of their role in “policy lending”2. In 1995 the Commercial Bank Law of China was promulgated,nft hydroponic system recognising the status of state-owned specialised banks as commercial banks operating according to market based banking principles of capital-adequacy, prudence, profitability, risk recognition, liquidity and responsibility for own profit and loss. In 1997 the Central Committee of the Communist Party and the State Council held the first National Financial Operations Conference and introduced several important measures to accelerate the reforms.First, the government issued RMB270 billion in special government bonds to recapitalise the Big Four banks. Second, new regulations abolished the credit quota policy and, instead,allowed banks to adopt asset-liability management. Finally, in a dramatic and significant step that marks the transition from the second to the third stage of banking reform, the central government transferred RMB1.4 trillion in nonperforming loans from the books of the state-owned commercial banks to new entities dubbed Asset Management Companies 3.
The third stage of banking reform is to turn state-owned commercial banks into joint-stock commercial banks with the state as the controlling share holder.In late 2003 the Law on the People’s Bank of China and the Commercial Banking Law were amended to establish the China Banking Regulatory Commission to oversee the reform of regulation of banking. Changes to the Commercial Banking Law freed the Big Four from the requirement to provide loans to State Council-approved projects and permitted them to carry out commercial banking activities—such as trading government bonds, dealing in foreign exchange and offering credit card services.As of end-2010, China’s banking sector comprises of two policy banks and China Development Bank , five large commercial banks, 12 joint-stock commercial banks, 147 city commercial banks, 85 rural commercial banks, 223rural cooperative banks, 2,646 rural credit cooperatives , one postal savings bank, four banking assets management companies, 40 locally incorporated foreign banking institutions, 90 foreign bank branches, 63 trust companies, 107finance companies of corporate groups, 17 financial leasing companies, four money brokerage firms, 13 auto financing companies, four consumer finance companies, 349 village or township banks, nine lending companies and 37 rural mutual cooperatives. In addition, a total of 395 new-type rural financial institutions were established, including 349 village or township banks, nine lending companies and 37 rural mutual cooperatives. The deposits attracted by these institutions to talled RMB75.27 billion, loans totaled RMB60.09 billion, and profits totaled RMB950 million. Meanwhile, 86.7 percent of the loans made by these institutions went to rural and agricultural uses as well as to SMEs. Among all,loans dispersed to SMEs alone numbered 31,000 and valued in aggregateRMB31.38 billion or 52.2 percent of the total value, while loans extended to rural households numbered 237,000 and valued RMB20.74 billion or 34.5 per cent of the total.