Recently, CCB spokesperson Hu Changmiao answered questions of journalists on the credit problem involved in the reckless construction of Inner Mongolia Xinfeng Power Plant as well as the cooperation between CCB and local governments since the beginning of this year.

The surface of the illegal construction of the Inner Mongolia Xinfeng Power Plant unveils serious problems of bank credit issuing. However, in this case, CCB just offered credit to Inner Mongolia Power Group Company Ltd. in line with related rules and regulations without directly issuing loans to any specific project, which of course does not breach the credit rules. When selecting corporate clients, CCB always gives top priority to the best infrastructure construction projects, the government agencies with the functions of capital management and supervision and the quality financial institutions which can bring sound return to the bank. CCB has made great efforts to strengthen risk management, optimize client structure, expand the effective market share of quality clients and explore the establishment of risk management and marketing service model for small and medium-sized enterprises.

As a large state-owned enterprise, Inner Mongolia Power Group Company Ltd. has long been one of our best clients. But we still have the problems of insensitivity to policies and unsophisticated post-credit management in the process of tracking clients’ use of credit. We will improve related rules and regulations to avoid the repeat of such problems. In fact, when we signed the agreement of intent on financial cooperation with the government of the Inner Mongolia Autonomous Region in October last year, a number of cooperation projects which violate industrial policies and might breach related rules have been excluded after strict examination.

Since the beginning of 2006, CCB has signed the cooperation agreements with 15 provincial and autonomous region (municipal) governments including Inner Mongolia, Sichuan, Hubei, Zhejiang, Hainan, Hebei, Suzhou, Jiangsu, Guangxi, Liaoning, Xiamen, Guangdong, Shenzhen and Shanghai Pudong New District, covering a total credit of RMB1.3486 trillion of which RMB230 billion will be lent to small and medium-sized enterprises.

Bank-government cooperation is a market-oriented and commercial behavior of commercial banks. In addition to businesses and residents, government is also the important client of commercial banks. When cooperating with local governments, we regard the local governments as our important clients and purely treat such cooperation as normal business relations. Such cooperation between bank and government aims at tapping the traditional advantage of infrastructure project financing and leading services of CCB to support the sustained growth of local economy, industrial upgrading and transform of economic growth mode and promote the sustainable and healthy business growth of the bank itself. 

When signing the bank-government cooperation agreements, CCB always insists on prudent selection and never intends to make “guanxi” with local governments. There does not contain any mandatory or reckless promise in the agreements which strictly follow the rules of market economy and fully comply with related laws and regulations. CCB strictly implements the credit system and risk control policies. The agreements just define the cooperation areas in principle. It is crystal clear to both parties that the projects as well as the credit covered in such agreements will be examined, assessed and approved in compliance with the credit examination and approval procedures of CCB and credit will only be issued under the conditions of coming in line with the national macroeconomic policies, industrial policies, regional development policies and laws and regulations as well as CCB’s credit policies and with the approval of the CCB staffs in charge of credit issuing. 

 Up to now CCB has not issued any “bundling credit”, which has been fully recognized by the People’s Bank of China and the Chinese Banking Regulatory Commission. Each year CCB issues over RMB2 trillion of loans including more than RMB200 billion of medium and long-term credit. Therefore, our promise of credit support is realistic and falls within our business capacity. By the end of last year, CCB’s capital adequacy has reached 13.67%, general savings deposits amounted to RMB4 trillion and credit balance to RMB2.46 trillion with a 61.5% of loan-to-deposit ratio. Our strategic cooperation with the Bank of America has further raised our risk management capacity and allowances to non-performing loans ratio, which gives us adequate fund to support the expansion of credit business.

In our cooperation with local governments, the responsibilities and obligations of governments, i.e. optimizing local financial environment and supervising the honest operation of businesses, are always defined clearly, which will surely improve the overall social financial environment and stimulate not only the business growth of the bank but also the healthy progress of the entire financial industry. Meanwhile, CCB and local governments have adopted various measures, including establishing the joint meeting, information exchange, credit risk alarm and prevention and agreement implementation guarantee systems and built an effective coordination mechanism to comprehensively implement the bank-government cooperation agreements, closely follow up the projects development, make active marketing efforts and provide efficient financial services.

To facilitate the implementation of the national macro control policies, control the excessive growth of credit and effectively prevent risks, the Chinese government has formulated policies requiring banks to standardize various “bundling credit”. We believe that such policies will help banks standardize credit issuing and improve credit quality. CCB has taken measures in response to the national policies to continue standardizing the credit examination and approval procedures. We also believe that local governments are making active efforts to build sound image and maintain the market economic order and playing a positive role of establishing a sound financial environment. It will help CCB to strengthen the marketing efforts for quality projects and clients, increase the effective project reserve, expand market share and enhance services and competitiveness.

We are glad to see that the efforts made by CCB to deepen the reform and achieve sound operation over the years have been recognized by the society. On the list of top world banks selected by the Britain-based journal The Banker according to the tier 1 capital of banks in June 2006, CCB ranked the first among Chinese banks and the 11^th among world banks. It ranked the 65^th on Forbes’ 2006 list of Top 2,000 Global Listed Companies and the 2^nd among Chinese listed companies. It was awarded the “Best Management Company,” “Best Dividend Payout Company” and “Best Corporate Governance Compliance Company” by FinanceAsia in 2006. On the list of Top 300 Asian Banks released by Asiaweek in 2006, CCB was recognized as the bank with the “highest net interest income” and the “highest net profit”, and therefore rated as the “most profitable bank in Asia.” It can be said that CCB is a bank with the best asset quality and the most prudent operation and management.