China's premier called the country's big banks a monopoly that needed to be broken to get money flowing to cash-starved private firms, as the nation's economy appears to have skidded to its slowest growth in three years. China's state banks make money "far too easily", state media quoted Premier Wen Jiabao as saying on Tuesday, in comments that reignited debate over the role of banking in cushioning the descent of the high-flying economy, the world's second largest.
"Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital," China National Radio quoted Wen as telling local businesses at a roundtable discussion.
"That's why right now, as we're dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly," the radio news service reported Wen as saying on its website. Wen's comments came as a senior economic official, citing a "related research agency", revealed the economy might have grown 8.4 percent in the first quarter from a year earlier, the slowest growth since the second quarter of 2009, when China began to accelerate out of the global financial crisis. The official GDP figures are due to be released next week.
Such a result would be in line with private economists' forecasts - and with efforts by Chinese policymakers to engineer a gradual slowdown in the economy, which had been speeding along at an unsustainable rate of more than 10 percent two years ago. Experts said the need for further steps was apparent, though it remained to be seen whether the views of Wen, due to step down next year in China's biggest leadership change in a decade, would translate into action under the new leadership.
The Big Four banks, including Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China and China Construction Bank , have long maintained a stranglehold on virtually every aspect of the financial services industry.
In another move to usher more capital into the economy, China also announced it would widen a major channel for inward foreign investment in Chinese markets, expanding a quota for foreign institutional investment by $50 billion to $80 billion. In addition to boosting the qualified foreign institutional investor scheme (QFII), which is currently nearing its limit, China said it would allow foreign investors to plough more of their offshore yuan holdings into mainland securities. The Renminbi Qualified Foreign Institutional Investor scheme (RQFII), is being boosted by 50 billion yuan ($7.9 billion), the China Securities Regulatory Commission said.