China Commercial Banks Post Record Profits in 2011


February 20, China's commercial banks saw net profit rise to a record 1.04 trillion yuan (165.1 billion dollars) in 2011, up 36.3 percent from a year earlier, according to latest China Banking Regulatory Commission data.

Total assets rose 18.9 percent to 113.28 trillion yuan at the end of December, while commercial banks' non-interest profit increased 19.3 percent in the fourth quarter of last year, slower than in the previous 3 quarters.

Chinese banks' benefit from a monopoly position and fixed interest rates. The average gap between lending and borrowing rates widened to 2.7 percent from 2.5, Reuters reported.

Those figures are likely to draw the ire of consumers frustrated with high-fees and poor service. The banking regulator last week ordered all of China's lenders to promote transparency in their fees and services. Small and medium-sized enterprises that are suffering from a credit crunch will also be dissatisfied.

Experts believe marketization will help to improve the country's banking system. They say China needs to break the market monopoly system and introduce a market-oriented mechanism to set interest rates in order to transfer social wealth to enterprises and citizens.

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