Provincial government awaits final regulatory go-ahead

The nation's first privately sponsored banks in 18 years could be born in Zhejiang province, a sign of the government's increasing willingness to allow private capital to play a role in the State-dominated sector, according to a number of officials and business executives.

You Xiaoping, chairman of Huafeng Group Co Ltd, a Wenzhou -based chemical materials provider, told China Daily that his company has joined with other local entrepreneu rs to file an application to launch a private bank.

The application has been approved by the provincial government and is awaiting final approval from the China Banking Regulatory Commission.

Wenzhou Mayor Chen Jinbiao said the application has been sent to the CBRC, although there isn't any timetable for final approval.

Citing people familiar with the matter, website Aastocks, a Hong Kong-based financial information and analysis provider, reported last week there are four probable candidates for the first round of private bank trials.

Zhejiang province has two cadidates: the group that Huafeng joined and a Web-based bank with investment from Alibaba Group Holding Ltd.

Regulators haven't approved the establishment of a private bank since 1996, when China Minsheng Banking Corp Ltd was founded. The government has only allowed small amounts of private capital to be invested in minority shares in commercial banks.

China has five State-owned commercial banks, three policy banks, 12 joint-stock banks, 144 city commercial banks and numerous banks in towns and rural areas. But private small businesses have complained for years that it's next to impossible for them to get loans from these banks, which prefer large State-owned corporations.

Allowing the formation of new private banks is also in line with the government's reform package, which aims to introduce more competition and open more State-dominated sectors to private investors, which have complained for years of being barred from lucrative sectors such as finance.

"The establishment of private banks is just a matter of time, hopefully within this year. It will be a big boost for the improvement of the national financial system," said Mei Xingbao, an external audi to r of Bank of China Ltd.

In an announcement after the Third Plenum Meeting of the 18th CPC Central Committee, China said it will "allow" certain "mature" private investors to sponsor small and medium-sized financial institutions, including banks.

In last week's Government Work Report delivered by Premier Li Keqiang, the word "allow" was replaced by "steadily promote".

In a January meeting, the CBRC said the private bank trial will be launched in 2014, with three to five applicants getting licenses.

"We'll approve them on a case-by-case basis as long as applicants meet the required conditions," CBRC Chairman Shang Fulin said. So far, there are few details on the would-be banks.

You said that in the plan his group has submitted, Nan Cunhui, chairman of the Chint Group (a maker of electrical grid equipment), will be the main sponsor with about a 20 percent share. You and other local tycoons would take smaller shares.

Wang Junjin, chairman of Juneyao Group, said during the "two sessions" that he has submitted an application to form a private bank. Juneyao is involved in sectors such as food, high technology and aviation .

Wang, You and Nan all are either deputies of the National People's Congress or members of the National Committee of the Chinese People's Political Consultative Conference. All hail from Wenzhou.

But they have kept a low profile so far. You, for example, said he has low expectations for the profitability of a bank, because of increasing competition and the liberalization of interest rates.

"No matter how much operational flexibility the government gives us, we have to try as we advance. The key is participation. We have to work hard on our own and can't wait passively for policies," You said.

Chen said the arrival of a new group of private banks will be a breakthrough, because a regional financial system is being built to complement the existing national system.

But he said that these few new banks will have more of a "symbolic" meaning than a substantial one, because the difficulty of capital access can't be addressed by a handful of private banks.