Chinese Prime Minister Wen Jiabao: Our banks have too much power

Chinese Prime Minister Wen Jiabao said today on China National Radio that the country’s biggest state-run banks have too much power and should be broken up, the New York Times reported.

"Frankly, our banks make profits far too easily,” China National Radio quoted Wen as telling local businesses at a roundtable discussion, Reuters reported. “Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital.”

"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, according to Reuters.

According to the New York Times:

The remarks, delivered during a national radio address while the prime minister was traveling in southern China, were unusually bold and appeared to be a direct challenge to others in the nation’s Communist Party leadership to speed up reforms of the nation’s financial system.

While China’s big four state-run banks, which hold most of the nation’s financial assets, are highly profitable, individuals receive little interest on their savings accounts and entrepreneurs complain that many state-owned banks won’t loan them money, the Times reported.

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In late 2011, news emerged of entrepreneurs in Wenzhou, China’s private enterprise region, who had gone into hiding or committed suicide after they were unable to pay back the high interest on loans they’d obtained from underground lenders, Reuters reported. The People's Bank of China estimates that 5.6 percent of total lending in China occurs under the table, according to Reuters.

Last week, China's Cabinet approved a pilot project that will allow small businesses to obtain financing more easily and cheaply, Reuters reported. Private investors in Wenzhou will be permitted to set up financial institutions such as loan companies and rural community banks.

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