Chapter I Starting Point
– Carving out an Independent Financial System
from the State Treasury
Section I Launch of Reform and Opening Up 2
I. Reflecting on the Path of Economic Development 2
II. Sounding the Clarion Call for Reform and Opening Up 6
III. Laying the Theoretical Foundation for Socialist Economic Structural Reform 8
IV. Setting the Goals for Building a Socialist Market Economy at the 14th CPC National Congress 10
V. Economic Reform Called for Banking Reform 12
Section II Banks Emerged as Main Channels of Investment and Financing 17
I. Diminishing Fiscal Inputs 19
II. Issuing Government Bonds and Tapping Foreign Capital 22
III. Bank Financing Inevitably Overtaking Fiscal Appropriations 23
Section III Institutional Reform as Starting Point of Financial Reform 31
I. Reopening and Establishment of Specialized Banks 32
II. Birth of Joint-Stock Banks 38
Section IV Bank Reform Invigorated the Economy 40
Chapter II Impetus for Reform
– Financial Sector Remediation and Surfacing
of Non-Performing Assets
Section I Macro-Finance and Governance 47
Section II The Non-Performing Loan Quandary 55
I. Crisis in Bank Asset Quality 55
II. Direct Causes of NPAs 69
III. Root Causes of NPAs 101
Section III Early Explorations at Reform 108
I. Bringing Corporate Approaches to Specialized Bank Operation 109
II. Separating Policy-Based Lending from Commercial Activities 111
III. Promulgating Banking Laws 114
IV. Transforming the Operating and Management Philosophy of State-Owned Banks 115
Chapter III Responding to Crisis
– The Asian Financial Crisis Ushered in a New Round of Financial Reform
Section I The Asian Financial Crisis 120
I. Financial Turmoil in Southeast Asia Under
the Speculative Attacks of International Capital 120
II. Lessons Learned 123
Section II The First National Financial Work Conference 131
I. Drafting the Blueprint of Financial Reform 136
II. Significance of the First National Financial Work Conference 140
III. Joint-Stock Reform of State-Owned Banks: The Conference’s Neglected Topic 144
Section III The Five Pillars of Deepening Reform 147
I. Centralizing the Financial Regulatory System 147
II. Establishing the Industry-Segregated Operation and Management Framework 151
III. The First Round of Capital Injection 153
IV. Assessing the Loan Situation and Implementing
the Five-Category Classification Scheme 159
V. Establishing Financial Asset Management Companies
and the First Round of NPL Divestiture 166
Chapter IV Breakthroughs in Joint-Stock Reform
– Finalization of the Path and Proposal
of the Joint-Stock Reform
Section I Theoretical Studies and Breakthroughs 184
I. Discussions and Controversies of Choosing a Path for Joint-Stock Reform 184
II. Theoretical Breakthrough at the National Level 193
Section II Finalization of the Path for the Joint-Stock Reform
of State-Owned Banks 201
I. Favorable Timing and Conditions 201
II. Reform Urgent Amidst Changing Landscape 217
III. Final Decision: Holding of the Second National Financial Work Conference 222
Section III Regulatory Reform Creating Conditions
for the Joint-Stock Reform 232
I. New Arrangements for Financial Regulatory Reform 233
II. Establishment of the CBRC 234
Section IV Formulation and Implementation of Joint-Stock Reform Plans
of State-Owned Banks 237
I. No Agreement on the RMB 970 Billion NPL Divestiture Plan 238
II. Experimental and Exploratory Efforts 249
Section V Release of the Plan for the Joint-Stock Reform 280
I. A Report to the State Council 280
II. Follow-Up Discussions and Refinement 307
Chapter v Launch of Pilot Reform
– Joint-Stock Reforms and IPOs of CCB, BOC,
and BoCom
Section I Establishment of Central Huijin and Capital Injection 315
I. Establishment of Central Huijin 315
II. Capital Injection with Foreign Reserves 321
III. Discussions and Debates 323
Section II Joint-Stock Reform and Listing of CCB 329
I. Preparations 331
II. Financial Restructuring and Establishment of the Joint-Stock Company 341
III. Involvement of Foreign Strategic Investors 362
IV. Public Listing 370
Section III Joint-Stock Reform and Listing of BOC 374
I. Becoming One of the First Pilot Banks for Joint-Stock Reform 376
II. Financial Restructuring and Establishment of the Joint-Stock Company 387
III. Introduction of Strategic Investors 394
IV. A Challenging Journey to Listing 403
V. IPO 409
VI. Significance of BOC’s Joint-Stock Reform and Listing 413
Section IV Advancing the Joint-Stock Reform of BoCom 415
I. Unique Features of BoCom’s Reform 416
II. Financial Restructuring 429
III. Engagement of Foreign Strategic Investors 443
IV. Listing in Shanghai and Hong Kong 453
Section V Accusation of “Gross Underpricing” of State-Owned Banks 468
Chapter VI Expansion and Conclusion
– Joint-Stock Reforms and IPOs of ICBC and ABC
Section I Joint-Stock Reform and IPO of ICBC 476
I. Sounding a Strong Prelude to the Joint-Stock Reform 481
II. Innovative Joint-Stock Reform Plan Based on the “Special Joint Fund” Account 505
III. Financial Restructuring, Group-Wide Restructuring,
and Introduction of Strategic Investors 514
IV. ICBC’s “IPO of the Century” 531
Section II Joint-Stock Reform and IPO of ABC 541
I. The Uniqueness of ABC’s Joint-Stock Reform 542
II. Four Revisions of the Joint-Stock Reform Plan 557
III. Financial Restructuring and Creation of the Joint-Stock Company 563
IV. Innovative Introduction of Strategic Investors 571
V. ABC’s IPO 573
Chapter VII Strengthening the Foundation
– Development of Corporate Governance and
Internal Risk Controls in Major Commercial Banks
Section I Development of Corporate Governance Systems 587
I. Building an Effective and Accountable Governance Structure 589
II. Developing a Sound Corporate Governance System and Mechanism 611
Section II Development of ERM System 625
I. Developing Robust RM Culture 626
II. Creating Sound RM Frameworks 628
III. Building Rigorous Delegation and Limit Management Systems 632
IV. Building Empirical Risk Identification and Measurement Systems 637
V. Creating Effective Risk Monitoring Systems 646
Section III Development of Internal Control System 647
I. Defining Organizational Structure of and Responsibilities
for Compliance Management 649
II. Building Compliance Systems and Mechanisms 651
III. Identifying Responsibilities for and Handling of Risk Events and Violations 652
IV. Boosting Compliance Culture and Awareness 655
V. Establishing ICC Methods to Improve Risk Control Capability 656
VI. Facilitating Efficient Internal Control Management 658
Chapter VIII Post-Reform Rejuvenation
– An Analysis of the Effectiveness of
the Joint-Stock Reform
Section I Post-Reform Rebirths of Major Banks 663
I. Transformation of Operating Model 663
II. Pillars for the Real Economy 687
Section II The Financial Cost and Benefit of the Joint-Stock Reform 698
I. Evaluation Framework 699
II. Cost-Benefit Analysis 701
Epilogue 713
Afterword 728
