With the rapid growth of the Chinese economy, China's banks have also increased in size over the years. Forming the mainstay of the economy, the banks have undergone significant reforms in the past two decades, although China's banking industry still largely remains under state control. In 2003, the Chinese government set up Central Huijin Investment Ltd, an investment company, which owns majority shares in the "Big Four" banks. In this way, the Chinese government can continue to manage and regulate the country's banking sector.
According to the world ranking of banks in terms of capitalization, China's "Big Four" banks now occupy the top six positions. the top five banks in China (in terms of capitalization) are as follows.
1. The Industrial & Commercial Bank of China (ICBC) - (market capitalization: US$223.4 billion)
It is currently the largest bank in the world in terms of market capitalization as well.The ICBC was founded in 1984 and headquartered in Beijing. The Bank employs more than 390,000 people and serves over 250 million retail and corporate customers. The Chinese government owns about 70% of ICBC. In October 2006, it was listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange, which was also the world's largest IPO at that time valued at US$21.9 billion.
It is also a market leader in the country in many business areas of commercial banking. In 2011, it ranked 7th on the Forbes Global 2000 list of the world's biggest public companies.
2. China Construction Bank (CCB) - (US$167.1 billion)
Founded in October 1954 as the "People's Construction Bank of China", the China Construction Bank (CCB) attained its present name in 1996. It is the second largest bank in the world by market capitalization. It employs over 300,000 people and serves more than 40 million personal online banking customers. The CCB operates more than 13,600 local branches, over 39,000 ATMs and maintains overseas branches in New York, Hong Kong, Singapore, Frankfurt, Johannesburg, Tokyo, Seoul and Sydney. In 2005, CCB made its IPO on the Hong Kong Stock Exchange, which was followed by another listing on the Shanghai Stock Exchange in 2007.
The CCB specializes in medium to long-term credit for long term specialized projects, such as infrastructure projects and urban housing development. Its corporate strategy in China is to prioritize their efforts in the major cities of the more developed geographical markets of the Yangtze River Delta, Pearl River Delta and Bohai Rim regions, while also accelerating their development in the provincial cities of China's inland provinces.
3. Agricultural Bank of China (ABC) - (US$134.9 billion)
The Agricultural Bank of China (ABC) was founded in 1951 and has its headquarters in Beijing. Since the late 1970s, the ABC has evolved from a state-owned specialized bank to a wholly state-owned commercial bank and subsequently a state-controlled commercial bank. On 15 January 2009, the Bank was restructured into a joint stock limited liability company.
It currently has 24,000 branches throughout mainland China, and also in Hong Kong and Singapore. The ABC specializes in providing financing to China's agricultural sector and offers wholesale and retail banking services to farmers, township and vilalge enterprises and other rural institutions. It has 320 million retail customers and 2.7 million corporate clients.
The ABC was the last of China's "Big Four" banks to go public. In July 2010, it launched its IPO in both the Hong Kong and Shanghai Stock Exchanges, raising a total of US$19.2 billion. This was also the largest IPO at that time.
4. Bank of China (BOC) - (US$122.2 billion)
Founded in 1912, the Bank of China (BOC) was established by China's republican government to replace the Government Bank of Imperial China. It initially functioned as a central bank for the Chinese government, until this role was taken over by the Central Bank of China in 1928. Subsequently, its role evolved to become one of an international exchange bank and foreign trade bank.
Headquartered in Beijing, the BOC specializes in foreign-exchange transactions andtrade finance. In 2002, BOC Hong Kong (Holdings) was successfully listed on the Hong Kong Stock Exchange. The US$2.8 billion offering, which was then considered a signficant milestone in the reform of China's banking industry, was over-subscribed by 7.5 times. Subsequently, in 2006, the BOC itself launched an IPO on the Hong Kong Stock Exchange. This time, the offer was over-subscribed by 76 times, raising a total of US$9.7 billion.
The BOC is considered the most international of China's banks with branches in 27 other countries, though these operations account for less than 4% of its total. The BOC's core business is commercial banking, including corporate banking, personal banking and financial markets services.
5. Bank of Communications - (US$43.9 billion)
Though not part of China's "Big Four" banks, the Bank of Communications (BOCOM), headquartered in Shanghai, is the fifth largest bank in China. Founded in 1908, BOCOM was one of China's oldest banks. After the end of the Chinese Civil War in 1949, the bank was split into two with one in Taiwan (under the Kuomintang government) and the other in Mainland China. In 1958, while the Hong Kong branch of BOCOM continued to operate, the mainland business of BOCOM was merged with the People’s Bank of China and the People’s Construction Bank of China. In July 1986, BOCOM was restructured to become China's first state-owned shareholding commercial bank.
BOCOM has an extensive network of over 2,800 branches covering over 80 major cities in China. Apart from Hong Kong, the Bank has also established overseas branches in New York, Tokyo, Singapore and representative offices in London and Frankfurt. As of June 2011, BOCOM is 26.5% owned by China's Ministry of Finance, while the Hong Kong and Shanghai Banking Corporation (HSBC) Ltd (a British bank) has a 18.6% stake. (In January 2005, HSBC bought a 19.9% stake in BOCOM as part of its strategy to expand into the Chinese banking industry.)
The challenges currently faced by the banks are to manage the repercussions arising from the world financial crisis, as well as cope with a slowing domestic economy. Moreover, China’s rapidly expanding middle class and increasing number of high net worth individuals now have growing expectations about the services they expect and currently receive. These banks realise that they will have to create better brand awareness if they intend to do well in the ensuing years.