China seeks help in bank reforms

China has sought India's expertise in reforming its banking sector, which is plagued by huge non-performing loans.

Pitching for a partnership with India for developing its financial sector, visiting Chinese Vice-Finance Minister Li Yong outlined the state of the country's banking sector at the first India-China financial dialogue here.

"We are looking at bilateral partnerships as part of our effort to develop the Chinese financial sector," Yang Shaolin, an official of the Chinese delegation said. "State-owned banks control 60 per cent of the sector. Their reform will have a huge bearing on China's future," he added.

The Chinese delegation listed non-performing loans as the biggest problem facing the state-owned banks. "There are four major banks with non-performing loans of 25.6 per cent," the official said.

At the same time, the Chinese delegation said Bank of China, China Construction Bank and Industrial and Commercial Bank of China were BASEL II-compliant and had non-performing loans of 5.31 per cent, 3.6 per cent and 4.64 per cent, respectively.

The delegation said their approach to developing the banks was to replenish them with capital, reform the shareholding by getting strategic partners, manage non-performing loans with a market-oriented approach and get the banks listed.

Finance ministry officials shared India's approach to raising agricultural credit, finance to small and medium enterprises and infrastructure sector and revival of the co-operative sector. The Indian delegation was headed by Department of Economic Affairs Secretary Ashok Jha.

Like the Indian government, the Chinese government has adopted a strategy of retaining majority stakes in state-owned banks.

The Reserve Bank of India officials gave a presentation on monetary policy and shared the central bank's experience in managing huge capital inflows in the recent times. The Chinese delegation gave an overview of the country's experience in moving to market interest rates.

The next meeting is expected to take up discussions on regulatory issues in the financial sector in both the countries.