Retail Banking in China.pdf

Retail banking in China 77
Retail banking in China
The race is on to make money from individual consumers. Foreign banks
had better get into the game.
David A. von Emloh
and Yi Wang
Chinese banking faces a dramatic transformation over the next ten
years. While we expect the overall profits of the sector to grow at an annual
rate of about 10 percent, the source of its earnings will change signifi-
cantly: by 2013, we estimate, corporate banking’s now overwhelming share
of the sector’s profits will decline to little more than half as profits
from retail banking increase more quickly (Exhibit 1, on the next page).
Three main forces will propel these developments. The first is strong
and increasingly consumption-driven GDP growth, ranging from 7 to
9 percent in recent years. Prosperity will boost demand for retail-lending
products such as car loans, credit cards, and mortgages. Second, demand
for traditional corporate-banking products, particularly deposits and
loans, will fall. As panies centralize their cash management,
the “stocks” of deposits held by each of their provincial operations will
be greatly reduced. Moreover, panies now rely almost entirely
on bank debt for financing, but over the next ten years we expect the
development of capital markets to reduce demand for loans. Third, over
the next five to seven years, we believe that the Chines