"We have broken down our five-year targets into what we can do each year, each quarter, and even each month," said Jiang Jianqing, president of the Industrial and Commercial Bank of China (ICBC). "We go step by step."

The goal of the top banker is to build ICBC - China's biggest State-owned commercial bank - into one that is "fundamentally healthy" by international financial and accounting standards in the coming five years, before foreign banking giants are granted full access, including the crucial local currency retail businesses.

Jiang said that two more years after the five-year grace period, he hoped his bank would have "basically no noticeable distance with the best commercial banks in the West."

A landmark turnaround in asset quality has been boosting the banker's confidence in the face of an array of thorny issues, including the agonizing problem of non-performing loans (NPLs) haunting Chinese bankers.

It is not "that serious" for a bank to incur some risks, Jiang said. However, he added: "The more important thing is how you control, reduce and dissolve them."

The ICBC's NPL ratio, in Chinese-defined terms, dropped by 2.8 percent in the first nine months of the year, thanks to a painstaking bad-loan-reducing campaign that gathered pace this year.

The ICBC tightened controls on its lending activities this year, keeping a close eye on major NPL indicators, by Chinese and international standards, and cracking down on employee misbehaviour.

The ICBC's NPL ratio for this year's loans stands at a globally competitive 0.3 percent. The bank's outstanding NPL ratio is expected to be announced by the end of the year.

Apart from efforts to cut back on bad loans, China's State-owned commercial banks are also seeking measures to raise more capital to meet the Basel Capital Accord's capital adequacy ratio (CAR).

With their total assets expanding quickly, largely on the back of the traditional savings business, China's commercial banks lack a mechanism to raise their capital bases regularly to meet capital adequacy requirements, bank officials said. The ICBC's total assets have expanded by 300 billion yuan (US$36 billion) to 400 billion yuan (US$48 billion) in recent years. Such measures should look beyond the traditional way, which usually involves the finance ministry infusing funds into State-owned commercial banks, Jiang said.

In an effort to expand its presence in investment banking and diversify profits, the ICBC is talking to "globally prominent" investment banks for a potential partner.

"We are currently in negotiations," Jiang said, only adding that he was expecting a breakthrough in the near future in the negotiations on the partnership, which would be "close and wide-ranging."

Operations are already diversifying at Jiang's bank. Profits from intermediary businesses have expanded by 30-50 percent annually over the past few years. And consumer loans, which emerged in China only three years ago to stimulate private spending, are expected to hit 200 billion yuan (US$24 billion) at the year-end in outstanding volumes.

(China Daily 10/19/2001)