Wen Jiabao Urges Breakup of Bank Monopoly

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Chinese Premier Wen Jiabao said on Tuesday the country's state owned banks are monopolizing the financial system. He says it needs to be totally opened up to get more money flowing to cash-starved private firms. The announcement comes as the nation's economy appears to have slid to its slowest growth in three years.

Wen recently traveled to Guangxi and Fujian provinces were he met with banking leaders to address his concerns. During the trip he said, (quote) "State-owned banks are making profits far too easily. Why? Because of the monopolization of only a few major banks that can loan money, making it very difficult to borrow money elsewhere. The fundamental solution for private financing is to break up the monopoly of state-owned banks."

Dr. Frank Xie, a business professor at the University of South Carolina Aiken, says the state-owned banks monopolize China's financing industry, suppressing the development of foreign and private banks.

[Dr. Frank Xie, University of South Carolina Aiken]:
"In China, a bank monopoly is actually under the rule of the Chinese Communist Party. In fact, state-owned banks control China, only allowing limited foreign banks and services to exist. Wen Jiabao now also admits that banks too easily generate profit."

In the meeting, Wen ordered the break up of the monopoly, but Dr. Xie believes it would be almost impossible to implement.

[Dr. Frank Xie, University of South Carolina Aiken]:
"Do you expect the CCP will implement it? I think it's impossible... Will they really allow private and free market competition to exist? It's impossible. Once the CCP abandons that monopoly, it means the CCP's rule will collapse."

The Big Four banks are all state-owned and include Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China and China Construction Bank.

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