Financial China

Disintermediation driving bank profits

  • Published 26 Nov 2009

China's big state banks are moving away from plain vanilla lending to grow profits.

China's big state banks have tended to be plain vanilla lenders, thriving off the large, state-mandated spread between low deposit rates and significantly higher lending rates. Savers, for their part, have been willing to keep putting their money in the bank (in spite of the modest returns they receive) because of a relative lack of investment alternatives. The cozy nature of the system suited banks just fine, reinforcing their conservatism towards disintermediation and financial liberalisation.

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