China's major commercial banks are expected to make major breakthroughs in their share-holding reforms in the near future.

Following the splitting-up of China Construction Bank (CCB) into two groups - a company group and a share-holding company - last month, other major commercial banks are also expected to make rapid progress in comprehensive reforms, according to yesterday's China Securities Journal.

The China Banking Regulatory Commission has already mapped out a timetable for commercial banks' reforms, the newspaper said.

Relevant regulators are expected to finish studying the reform scheme by the Industrial and Commercial Bank of China this year. The bank will try to complete its share-holding reform next year.

The Bank of China (BOC), is to turn itself into a share-holding company in the near future, the newspaper said.

According to BOC Spokesman Wang Zhaowen, the time for establishing the share-holding company has not yet been decided.

"But the company should be established before the end of this year," he said.

China Securities Journal said the share-holding reform scheme by the Bank of Communications, the country's fifth largest bank, has been submitted to the State Council.

The bank's financial restructuring will be completed before the end of this year, it said.

The bank is also in talks with HSBC Holdings Pls about selling a stake of 19.9 percent, the newspaper said.

Officials at the Bank of Communications were not available for comment.

But experts said the move to introduce foreign partners as equity owners could be beneficial for increasing domestic banks' capital strength, optimizing their capital structure and diversifying the ownership of the banks.

Foreign company investors could also bring in advanced management experience and improve the banks' corporate governance.

CCB President Zhang Enzhao said earlier his bank would usher in company investors to hold stakes in its listed company, and BOC's Wang said his bank would choose its strategic investors this month or next.

Niu Li, a senior economist with the State Information Centre, said Chinese commercial banks will have to sharpen their competitive edge before the end of 2006, when foreign banks will have unfettered market access under China's World Trade Organization commitments.

The commercial banks will have to lower the rate of non-performing loans, get rid of historical financial burdens and raise their capital adequacy to international standards, he said.

Commercial banks' capital adequacy ratio will have to reach 8 per cent, the minimum required by the Basel Capital Accord reached by international banking managers, according to the nation's commercial bank law.

BOC Spokesman Zhu Min said earlier that his bank aimed to trim the non-performing rate to 6 percent by the end of this year.

"We aim to meet international standards for capital adequacy, bad loan provisions and bank liquidity by the end of this year," he said.

CCB's Zhang also said his bank would raise the capital adequacy ratio to "an ideal level" before the planned initial public offering.

CCB and BOC, which won a US$45 billion bail-out from the government in late December, were chosen by the central government as a pilot project to be turned into a joint stock bank.

(China Daily July 8, 2004)