Local Time: Print

Financial Services



China's banking system has undergone significant changes in the last two decades, especially, domestic commercial banks have undergone significant restructuring through effective reforms and many have accepted foreign banks as strategic investors. Cooperation and competition co-exist between Chinese banks and foreign banks.


The People’s Bank of China (PBOC) is China’s central bank, which formulates and implements monetary policy. The PBOC maintains the banking sector's payment, clearing and settlement systems, and manages official foreign exchange and gold reserves.

The PBOC oversees the State Administration of Foreign Exchange (SAFE) for setting foreign-exchange policies. SAFE is the government agency that drafts rules and regulations governing foreign exchange market activities, promoting the development of foreign exchange market, and providing the PBOC with references for the formulation of exchange rate policy.

China Banking Regulatory Commission (CBRC) was officially launched on April 28, 2003, to take over the supervisory role of the PBOC. The goal of the landmark reform is to improve the efficiency of bank supervision and to help the PBOC to further focus on the macro economy and currency policy.


A) State-Owned Commercial Banks – The ‘Big Four’:

In 1995, the Chinese Government introduced the Commercial Bank Law to commercialize the operations of the four state-owned banks, the Bank of China (BOC), the China Construction Bank (CCB), the Agricultural Bank of China (ABC), and the Industrial and Commercial Bank of China (ICBC).

The Industrial & Commerce Bank of China (ICBC): The largest bank in China by total assets, total employees and total customers. ICBC differentiates itself from the other State Owned Commercial Banks by being second in foreign exchange business and first in clearing business for renminbi (RMB), China's national currency.

The Bank of China (BOC): Specializes in foreign-exchange transactions and trade finance.

The China Construction Bank (CCB): Specializes in medium to long-term credit for long term specialized projects, such as infrastructure projects and urban housing development.

The Agriculture Bank of China (ABC): Focuses on providing financing to China's agricultural sector and offers wholesale and retail banking services to farmers, township and village enterprises (TVEs) and other rural institutions.

B) Policy Banks:

Three new "policy" banks, the Agricultural Development Bank of China (ADBC), China Development Bank (CDB), and the Export-Import Bank of China (Chexim), were established in 1994 to take over the government-directed spending functions of the four state-owned commercial banks. These banks are responsible for financing economic and trade development and state-invested projects.

ADBC provides funds for agricultural development projects in rural areas; the CDB specializes in infrastructure financing, and Chexim specializes in trade financing.

C) Second Tier Commercial Banks:

In addition to the Big Four, there are smaller commercial banks. The largest ones in this group include the Bank of Communications, CITIC Industrial Bank, China Minsheng Bank, Guangdong Development Bank Shanghai Pudong Development Bank, China Merchants Bank, and Shenzhen Development Bank. The second tier banks have tended to adhere more closely to commercial principles in their operations. However, they have also encountered problems with respect to asset quality.

D) Trust and Investment Corporations:

In the midst of the reforms of the 1980s, the government established some new investment banks that engaged in various forms of merchant and investment banking activities. The largest ITIC is China International Trust and Investment Corporation (CITIC), which has a banking subsidiary known as CITIC Industrial Bank.


Years of government-directed lending has presented Chinese banks with large amounts of non-performing loans often. The PBOC has encouraged banks to diversify their portfolios by increasing their services to the private sector and individual consumers. Other areas of reform often cited were the need for improved credit management systems, bank personnel training, and improvements and upgrades to banks IT infrastructure.

In January 2006, a personal credit rating system was launched nationwide to be used to assess consumer credit risk and set ratings standards. This system is an important move in developing China’s consumer credit industry, and increase bank loans to individuals.

The central government has allowed several small banks to raise capital through bonds or stock issues. The reform of the banking system has been accompanied by PBOC’s decision to decontrol interest rates. Market-based interest rate reform is intended to establish the pricing mechanism of the deposit and lending rates based on market supply and demand.


Market Demand

After China’s banking sector opened completely to foreign banks on December 11, 2006, export opportunities have developed for foreign commercial banks. However, major Chinese commercial banks will continue to dominate the retail banking market. In addition, domestic commercial banks have successfully restructured their operations. A dynamic process of interaction and integration is already underway between domestic and foreign banks as noted by the strategic investments made by foreign banks. In short, both opportunities for cooperation and competition are expected between Chinese banks and foreign banks.

Private banking and the retail-banking sector: China’s high net worth individuals (with assets larger than USD1 million to invest) are an important segment. The rising household income levels and an increasingly wealthy population continue to foster demand for a wide range of wealth management products. A report by Boston Consulting Group stated that nearly 310,000 households in China each hold net investment assets worth more than US$1 million. China is now third in the world in terms of having the largest number of millionaires.

In addition, with the increase in the number of individuals purchasing houses, cars and consuming other products, banks that offer better mortgages, auto loans, credit card products and other services will have competitive advantages.

Corporate banking sector: Since large private and state-owned enterprises can now obtain financing from the capital market, they have become less dependent upon bank loans. As a result, SMEs are becoming valuable clients to both the Chinese and foreign banks. At present, only 30 percent of small and medium sized enterprises (SMEs) financing demands can be satisfied because they normally find it difficult to obtain any type of credit from large banks. Most second-tier joint stock banks and city commercial banks have already made the SMEs their target clients. Standard Chartered, Citibank, and HSBC have all started SME financing activities. Foreign banks have more experience in market segmentation, better credit and risk control, good access to the international market, and more simplified procedures for credit approvals, all of which serve to attract Chinese enterprises as clients.

Best Products/Services

Private banking services and wealth management that target high net worth individuals: Nearly 30 Chinese banks currently offer RMB-denominated wealth management services. RMB-denominated private banking services and wealth management services are among the two best business prospects currently being offered by leading foreign banks in China, such as Citibank, Standard Chartered, HSBC and ABN AMRO.

Credit Cards: Foreign-funded banks can issue RMB-denominated credit cards after they become locally incorporated banks. All foreign-funded and Chinese banks are required to have good risk management and control systems and IT support systems in place to hedge risks in the issuance of credit cards in China. The People's Bank of China (PBOC), the central bank, is responsible for the operation and management of the payment system.

SME Financing Market: According to the National Development and Reform Commission (NDRC), the products manufactured or services offered by China’s 40 million SME comprise about 60 percent of China’s GDP. Chinese banks, especially city commercial banks, consider SMEs to be their target clients. More and more foreign banks in China are beginning to realize the great opportunities available through offering financing to SMEs.

QFII Custodian & QDII Custodian: In 2003, a qualified foreign institutional investors (QFII) scheme was introduced to allow foreign institutional investors, such as UBS, Deutsche Bank, Citigroup Global, and others to engage in the securities sector on the Chinese mainland. At present there are more than 50 approved QFII entities.

China also launched the qualified domestic institutional investor (QDII) system in July 2006, allowing QDIIs to raise RMB funds from domestic individuals and institutions and buy foreign currency from the State Administration of Foreign Exchange for overseas investment. As of the end of September 2007, 21 commercial banks had obtained a total of US$16.1 billion worth of foreign exchange quota for agent offshore wealth-management. The quota for five fund management companies is US$19.5 billion, and the quota for 14 insurance companies is US$6.57 billion. The total QDII quota has reached US$42.17 billion.

Residential Home Mortgage Loan Services: In comparison to Chinese commercial banks, foreign banks are disadvantaged by the lower number of outlets and employees that they have. Therefore, the foreign banks in China target high-end customers, such as foreign residents in China and wealthy Chinese individuals for the residential home mortgage loan market. HSBC, Standard Chartered, the Bank of East Asia, Citibank and Deutsche Bank, to name a few, are among the leading foreign banks that promote residential home mortgage loan services in China.

Back to top



China’s insurance sector is growing and developing rapidly. While domestic players dominate the market, foreign insurers are gradually attaining greater market share. Challenges remain, however, and include an overall lack of management talent, unsophisticated consumers, poor distribution channels and non-transparent regulatory approval processes.


The China Insurance Regulatory Commission (CIRC) is the agency authorized by China's State Council to regulate the Chinese insurance market. It was founded in 1998.


A) Life Insurance Firms:

Competition in the life insurance sector is strong. Domestic insurers control more than 95% of the market. The remaining 5% of the market consists of twenty-four foreign-invested life insurers.

The top three domestic life insurance companies--China Life, Ping An, and China Pacific Life--account for 70% of the market.

B) Non-Life Insurance Firms:

In the non-life sector, the large Chinese insurers also occupy the majority market share. The People’s Insurance Company of China (PICC) has 50% market share. PICC, together with Taiping Insurance and Ping An comprise 72% of the market.

Foreign firms occupy about 1% of the non-life market, and most have operations in only one city because of licensing constraints. Most foreign non-life insurers do business exclusively with multinational corporations, thereby generating steady profits. High competition exists in pricing, commission, service, intangibles such as corporate branding, and service networks.


On the regulatory side, foreign insurance companies have face several key obstacles, in particular a long approval process for opening additional branches and the difficulties in obtaining approval to offer specialty insurance products.

While concerns exist that China’s government is over-regulating the sector, most observers feel that China’s insurance sector is on track for sustained growth.


Market Demand:

China’s insurance sector is one of the largest and fastest growing in the world, generating an estimated U.S. $248 billion in insurance premium income in 2012.

Rapid rates of growth in the industry can be attributed to a variety of factors: China’s aging population, high savings rate, and poor social security system. Moreover, increasing numbers of wealthy consumers are spurring growth in the property and casualty, auto, and health insurance sectors.

China's insurance industry is also one of the most under-served and under-penetrated, with an estimated rate of 2.7%. This situation, when coupled with a fledgling middle and upper class, creates a wide range of opportunities for foreign firms, which possess comparatively strong industry knowledge and expertise.


Best Prospects:

There are several areas that offer the most promising opportunity for US insurers. The Chinese government is particularly interested in developing the healthcare and pension insurance sectors in order to sustain its state-owned enterprise (SOE) reforms and provide for the nation’s aging population.

The agricultural insurance sector is also a high priority since it considered important for assisting farmers and helping to maintain stability in the rural and farming areas where the majority of China's population still live.

The auto insurance comprises approximately 60% of China’s non-life premium income, and sustained growth in this sector is expected as car sales continue to skyrocket. Health insurance is also another large opportunity for insurers, since only a fraction of the Chinese population has health insurance.

China’s pension system is undergoing a massive transformation, shifting from the state-guaranteed system of the past to more modern commercial pension and insurance plans. This transformation provides new opportunities for pension insurance. Another area is product liability insurance. As China’s manufacturing levels continue to expand, a corresponding demand for product liability insurance is expected. China’s reinsurance market has just one large domestic player, China Re, and only a handful of foreign players. Key sectors driving demand in China’s reinsurance industry are the energy, transportation, and marine sectors.

Back to top



China’s securities sector is rapidly developing into a viable exchange within a market-driven system. A functioning capital market is vital for China’s sustained growth and development. The Chinese government understands this need and has committed to further liberalize the securities sector in the coming years.

Steps have been taken to create a more favorable investment environment by enacting a variety of reform measures, and new regulations regarding corporate governance, financial disclosure, and dividend policies have been implemented in recent years. However, foreign firms still face market access barriers.


The China Securities Regulatory Commission (CSRC) is the institution of China's State Council responsible for regulating the securities industry in China.

This institution has functions similar to the U.S. Securities and Exchange Commission in the United States.


China has two investment programs to accommodate for the fact that the Chinese currency, the RMB, is not fully convertible on the international market.

The Qualified Foreign Institutional Investor (QFII) program is designed to regulate foreign exchange investment in China's domestic stock markets. Under this system, approved foreign financial institutions can invest in the local stock market through designated accounts that adhere to finance and banking regulations.

The Qualified Domestic Institutional Investor (QDII) program is designed to allow domestic investors to exchange local currency to a designated foreign currency in order to buy overseas stock.


China has designated stock exchanges in Shanghai and Shenzhen. These stock exchanges offer two types of stock, A-shares and B-shares. A-shares are denominated in RMB, and can be owned by Chinese citizens and eligible financial institutions under the QFII program. B-shares are denominated in dollars and can be owned by foreigners. The Shanghai Stock Exchange (SSE), China’s most important stock market, was established in 1990 and trades both A and B shares. The Shenzhen Stock Exchange (SZSE) was set up in 1991 and also trades both A and B shares.


The activities that foreign financial firms may conduct are limited. China currently has a number of restrictions on foreign banks, including trading RMB products, limits on the range of products they may offer, and the ability to sell and trade A-shares.


While foreign firms have already made inroads into China’s securities sector, additional opportunities should emerge as the country further liberalizes its financial sector.

Fund management firms may have opportunities because of China’s inexperienced investors, the existence of questionable stock quality, and a shortage of reliable corporate information. The government is encouraging the sector’s development and expansion of product offerings. Opportunities also exist for custodian banking, acting as the primary communication channel between the QFII entity and the Chinese regulators.

Foreign brokerage firms’ participation in China’s brokerage sector has been limited to date. As changes take place, more opportunities for foreign securities firms could develop for them to expand their local operations to include proprietary trading, fund management and brokerage activities.

Opportunities exist for international investment banks to advise Chinese companies on overseas listings and on cross-border mergers and acquisitions. In addition, there is a market for research services based on solid financial modeling and analysis as well as advisory and consulting services for analysis of strategic investment initiatives.

Back to top

Reports and Statistics

Shanghai Private Banking Brief

China: Wealth Management Market
China’s dynamic economic growth has resulted in the creation of one of the world’s fastest-growing wealth management markets. With the rapid increase in the number of high net worth individuals in China, there is a great demand for wealth management and private banking services which various domestic and foreign financial institutions in China have begun to offer. Chinese governments have released several rules over the past two years to further develop and regulate the wealth management market. For financial institutions in China, opportunities and challenges exist together in the wealth management and private banking services.

China: Securities Industry
China’s securities sector is witnessing a dramatic transition: from dysfunctional bourse of a planned economy to viable exchange within a market-driven system. This transition is critical, as China’s sustained growth and development will depend upon a functioning capital market. The Chinese government understands this need, and has committed to further liberalize the securities sector in the coming years. Already, the China Securities Regulatory Commission (CSRC) has made efforts to create a more favorable investment environment by enacting a variety of reform measures. New regulations regarding corporate governance, financial reporting and disclosure, and dividend policies have been implemented in recent years. Equally significant, the splitshare reform process has reduced the number of non-tradable shares of listed companies, and foreign participation in the equities market has increased. These changes are all tremendous accomplishments, but much work remains. Challenges persist in the areas of regulatory transparency, rule of law, market infrastructure, and investor education. Foreign firms still face market access barriers. The next five to ten years will be crucial for the development of China’s securities sector, but most industry experts remain optimistic that future growth and opportunities lie ahead.

China: Private Equity Industry
China’s private equity (“PE”) sector is a burgeoning industry that is expected to grow rapidly in the coming years. While foreign firms currently dominate the market, bringing much-needed skills and expertise to the sector, the PRC government is actively encouraging the entrance of strong local players. The government recently introduced regulations that attempt to limit foreign investment in local companies. In addition to this challenge, foreign investors also struggle with cultural barriers and weaknesses in China’s banking and legal systems. Nonetheless, the profit potential in this industry is great, and U.S. firms that specialize in private equity services may benefit tremendously from making early inroads into the Chinese domestic market.

Back to top

U.S. Commercial Service Contacts

The U.S. Commercial Service offers a broad array of market entry services to U.S. companies in the financial services industry. Please refer to the following relevant contacts for additional information on how we can help you expand your business in China.

Beijing Office:
Tel: (86-10)8531-3000
Fax: (86-10)8531-3701
Vivian Tian

Shanghai Office:
Tel: (86-21)6279-7630
Fax: (86-21)6279-7639
Yuan Liu

Guangzhou Office:
Tel: (86-20)3814-5000
Fax: (86-20)3814-5310
Barry Zhang

Chengdu Office:
Tel: (86-28)8558-3992
Fax: (86-28)8558-3991
Liping Lin

Shenyang Office:
Tel: (86-24) 2321-1198
Fax: (86-24) 2321-2206
Yang Liu

Back to top

  Notice to Visitors!

  The link you have chosen will take you to a non-U.S. Government website.

  If the page does not appear in 5 seconds, please click this: outside web site

  Export.gov is managed by the International Trade Administration and external links are covered by its website  disclaimer statement.

  Notice to Visitors!

  The link you have chosen will take you to a non-U.S. Government website.

  If the page does not appear in 5 seconds, please click this: outside web site

  BuyUSA.gov is managed by the International Trade Administration and external links are covered by its website disclaimer statement.