About China Icbc
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One case in point is ICBCs corporate restructuring. ICBC occupies the top position in the Chinese banking industry, thus its restructuring plays a critical and strategic role in Chinas institutional reform of the financial sector. Being the nations largest bank, with its assets accounting for 18 percent of Chinas total financial assets (ICBC(Asia), 2006), the restructuring of ICBC is far more complex than other SOEs, as it is largely influenced by the greatest policy burden, tight intervention given to financial sectors.
China has been pushing its four large state-owned commercial banks (SCBs) (ICBC, Bank of China (BOC), China Construction Bank (CCB), and Agricultural Bank of China (ABC)) to restructure for deregulation of the banking industry during the past few years, so ICBC inevitably faces great challenges. Among the four large SCBs, ICBC is the most important but the most difficult to restructure as it is the largest lender for domestic business entities, which affecting the national financing structure and even the GDP.
Motivators of corporate restructuring in ICBC include: i) Changes in the Business Environment ii) Weak Corporate Governance iii) Poor Strategic Control iv) Poor Performance
Buckley argues that the radical changes in Chinas economic environment, in which the central government pushed SOEs to reform, have triggered SOEs restructuring. Chinese enterprises restructuring could be viewed as a response to increasingly global competition and to the environmental changes after China assessed the WTO.
China has undergone an unprecedented transformation from a central planning to a socialist market economy. The institutional changes related involve the central governments efforts to attack corruption, reform state enterprises, improve legal and regulatory system, overcome local protectionism, and to increase the availability of qualified personnel.
Weaknesses ICBCs weaknesses before restructuring lie in: 1) the irrational management hierarchy and large headcount resulted in barriers to communication as well as high overhead and administrative costs in ICBC; 2) low quality of assets, which was reflected in ICBCs high NPLs ratio and low capital adequacy rate; 3) low level of core competence. ICBCs leadership in domestic wholesale business was based on its large amounts of outlets and close relationship with enterprises. Yet this core competence was regarded as low level and unsustainable.
Opportunities First of all, Chinas fast growing economy has provided ICBC with a great opportunity of enhancing competitiveness. However, the biggest opportunity of building ICBC into a modern financial company has come from the support from the central government to reform Chinas banking sector. In addition, potential benefits of technical innovation of banks have been recognized by