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Introducing China's Banking Sector

China is home to the world's largest banking sector by total assets, while China's "big four" banks are also the largest four banks globally (see the latest ranking by S&P Global Market Intelligence here). In our China Banking series, we take a closer look at the Chinese banking sector. This article is the first installment of the series, where we delve into the history of banking in China and provide a general overview of how the Chinese banking sector is currently structured, as well as what kinds of banking models exist in the country. Most notably, the Chinese banking sector is primarily dominated by state-owned banks which are relatively well-capitalized and more risk-averse compared with their counterparts in the US and Eurozone. Distinctions between different kinds of state-owned banks (such as nation-owned banks versus policy banks) exist, as we'll discuss later in this article.

In Introducing China's Largest Banks, we introduce China's ten largest banks including each bank's history, value of total assets, relative size ranking, and ownership structure.

In Comparing China's Largest Banks, we compare the ten banks financially, including a revenue breakdown analysis based on revenue driver, business type, and geography, as well as a profitability analysis based on operating and net profit margins.

In The Future of China's Banking Industry, we discuss some key trends and factors that can affect the future of China's banking industry.

China Banking Series


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A History Of China's Banking Sector

We start with a brief history of China's banking sector.

1897-1911 (Late Qing Dynasty): The Emergence of Modern Banking

While pawn shops and other traditional forms of financial intermediaries had existed in China for centuries, modern banking only emerged at the end of the Qing (China's last imperial) dynasty. China's first modern bank, The Imperial Bank of China (中国通商银行), was founded in 1897 based on Western banking models in existence at the time. In 1905, the Qing dynasty's Ministry of Revenue (户部) founded the Daqing Bank of the Ministry of Revenue (大清户部银行), which functioned as both a commercial bank and a central bank with the authority to issue currency. The Daqing Bank of the Ministry of Revenue was renamed Daqing Bank (大清银行) in 1908.

Imperial China ended with the 1911 Xinhai revolution (辛亥革命) which overthew the Qing dynasty. The Republic of China (中华民国) was subsequently founded in 1912.

1912-1949 (Republic of China Period): A Time of Growth and Transformation

With the founding of the Republic of China, Daqing Bank was transformed into the Bank of China (中国银行) in 1912 and designated as the central bank of the Republic of China government. A postal savings system was established in 1919 with the founding of the Department of Postal Savings and Wiring (邮政储金汇业总局), which focused on providing postal savings and monetary wire transfer services. During the Republic of China period, the banking sector flourished in China with many small- to medium-sized privately-owned banks being founded.

From 1927 to 1949, China was in a state of war with intermittent fighting between the Kuomintang government of the Republic of China and the Chinese Communist Party (CCP).

By 1948, the CCP had already won over most of China and established the People's Bank of China (PBOC)(中国人民银行) to issue a new currency for use in the party's territory called the Renminbi (人民币). In 1949, the CCP won the civil war and founded the People's Republic of China (PRC)(中华人民共和国).

1949-1979 (Early PRC Period): An Era of Nationalization

After the founding of the PRC in 1949, assets from pre-existing banks were seized to create a banking system with four state-owned banks:

  • Agricultural Cooperative Bank (农业合作银行)

  • Bank of China (中国银行)

  • Bank of Communications (交通银行)

  • People's Construction Bank (中国人民建设银行)

The postal savings system formed during the Republic of China period became part of the newly established Ministry of Post and Telecommunications (邮电部), while the PBOC became the official central bank of the PRC.

In the 1950s, as the new communist government began implementing economic reforms, all banks, including the postal savings business under the Ministry of Post and Telecommunications, were merged to become subsidiaries of the PBOC. The PBOC thus functioned as both a central bank and a commercial bank throughout this time period.

1979-2000 (Reform and Opening-Up Period): Banking Reforms For A Modern China

Starting in the late 1970s, China embarked on a journey of economic reform and opening-up that paved the way for the country to become a modern economic powerhouse.

>> Establishing An Independent Central Bank

In 1979, the PBOC's dual role as both central bank and commercial bank ended as the PBOC's commercial banking functions were spun-off to establish or reinstate what are now commonly known as China's "big four" banks:

  • Agricultural Bank of China (中国农业银行)

  • Bank of China

  • Industrial and Commercial Bank of China (ICBC)(中国工商银行)

  • People's Construction Bank - now China Construction Bank (中国建设银行)

The PBOC functioned solely as a central bank onwards.

>> The Emergence Of Joint-Stock Banks

In 1986, joint-stock banks were allowed to form, as opposed to the completely state-controlled banks established in the early PRC period. The Bank of Communications (交通银行), currently China's sixth largest bank by total assets, was reinstated in 1987 as China's first nationwide state-owned commercial bank with a joint-stock ownership structure.

The same year, the postal savings business was also reinstated under the Ministry of Post and Telecommunications.

>> Establishing Independent Policy Banks

In 1994, further reforms were implemented as the policy lending functions of the big four banks were spun-off to form three new policy banks (政策性银行):

  • Agricultural Development Bank of China (中国农业发展银行)

  • China Development Bank (国家发展银行)

  • The Export-Import Bank of China (中国进出口银行)

The purposes of the policy banks are to conduct lending activity in accordance with the government's various economic policy goals, such as promoting the development of agriculture and rural areas, funding large-scale infrastructure projects, and supporting international trade and cross-border investments.

>> The Emergence Of Privately-Controlled Banks

In 1996, China Minsheng Bank (中国民生银行) was founded as the first privately-controlled (i.e. not majority owned by the central government or state-owned corporate entities) bank in China.

2000-Present (Modern China): Towards The World's Largest Banking System

China's banking system grew rapidly in the 21st century both in terms of size and scope. Many new banks were founded, while existing banks grew beyond their initial commercial focus to offer more comprehensive financial services with a universal banking model.

In 2007, the postal savings business was separated from the rest of the postal system to form a new bank, namely the Postal Savings Bank of China (中国邮政储蓄银行), which currently ranks as the fifth largest Chinese bank.

By 2010, China's banking system surpassed the US in terms of total assets.

By 2016, China was home to the world's largest banking system (see here).

According to S&P Global Market Intelligence (here), 20 of the world's 100 largest banks are Chinese based on 2022 data, with China's big four banks ranking as the largest four banks in the world in terms of total assets.

[EDIT 23/10/2023]: According to a July 2023 article by The Banker (here), Chinese banks account for 27.69% of total global banking assets, with US$41,994 billion in assets compared with US$21,847 for the US, US$28,162 for the Eurozone, US$13,348 for Japan, and US$8,485 for the UK.

An Overview Of China's Current Banking Sector

We turn to an overview of China's current banking sector, including the size in terms of total assets, the regulatory authority in charge of overseeing the sector, and a breakdown of the different types of banks in operation.


According to the PBOC, China's banking sector had total assets worth RMB406.25 trillion as of the end of Q2 2023.


As of May 2023, the National Administration of Financial Regulation (NAFR)(国家金融监督管理总局) has become the official regulator for the banking sector in China. The NAFR was formed based on the China Banking and Insurance Regulatory Commission (中国银行保险监督管理委员会), the previous regulatory entity in charge of overseeing China's banking sector.

Sector Breakdown

As of the end of June 2023, there are 4,561 banks in China, including:

  • 1 development financial institution (开发性金融机构)

  • 2 policy banks (政策性银行)

  • 6 nation-owned banks (国有银行)

  • 19 privately-owned banks (民营银行)

  • 41 foreign-owned banks (外资银行)

The remaining banks are classified as urban commercial banks (城市商业银行), rural commercial banks (农村商业银行), or rural banks (村镇银行). Specific numbers for each type of classification are not provided.

We explain the different bank classifications below.

Development Financial Institution (开发性金融机构)

The development financial institution refers to China Development Bank (国家发展银行), which was originally established as a policy bank but was re-classified as a development financial institution (开发性金融机构) in 2015. According to the China Association For The Promotion Of Development Financing (中国开发性金融促进会), the main difference between a policy bank and a development financial institution is that a development financial institution has a more market-based approach and can finance any development-oriented projects. This description is somewhat vague but we think it can be interpreted as saying that a development financial institution has relatively more autonomy in terms of decision-making and can lend to a wider range of borrowers, in contrast to policy banks which may have to adhere to policy guidelines and targets more strictly.

Policy Banks (政策性银行)

There are two policy banks in China. The first is the Agricultural Development Bank of China (中国农业发展银行), which is responsible for "supporting the development of agriculture, rural areas, and farmers". The second is The Export-Import Bank of China (中国进出口银行), which is "dedicated to supporting China's foreign trade, investment, and international economic cooperation".

Nation-Owned Banks (国有银行)

The nation-owned bank classification specifically refers to the six largest banks, namely:

  • Agricultural Bank of China (中国农业银行)

  • Bank of China (中国银行)

  • Bank of Communications (交通银行)

  • China Construction Bank (中国建设银行)

  • Industrial and Commercial Bank of China (ICBC)(中国工商银行)

  • Postal Savings Bank of China (PSBC)(中国邮政储蓄银行)

The heads of nation-owned banks are directly appointed by the central government and the banks' largest shareholders are the Ministry of Finance (财政部) and/or Central Huijin Investment (中央汇金投资有限责任公司), with the exception of PSBC which has China Post (中国邮政) as the largest shareholder. Central Huijin Investment is a sovereign fund established in 2003 which serves as a vehicle through which the central government can invest in state-owned financial enterprises. China Post is owned by the central government.

Only the above-mentioned six banks are classified as nation-owned banks. Other banks are not directly-owned and managed by the central government, even though they may be considered as state-owned banks if they are majority-owned by other state-owned enterprises or local governments. There is no specific classification for banks that are majority-owned by other state-owned enterprises or local governments even though such banks do comprise the majority of China's banking sector in terms of number of institutions.

Privately-Owned Banks (民营银行)

Privately-owned banks refer to banks that are majority-owned by non-state-owned entities.

Foreign-Owned Banks (外资银行)

Foreign-owned banks refer to banks that are controlled by foreign entities.

Urban Commercial Banks (城市商业银行)

Urban commercial banks are commercial banks that primarily operate in urban areas.

Rural Commercial Banks (农村商业银行)

Rural commercial banks are commercial banks that operate in rural areas with shareholders who are local farmers, merchants, companies or other organizations based in that region. Many rural commercial banks were formed from existing local cooperative banks.

Rural Banks (村镇银行)

Rural banks are banks set up to primarily serve rural area farmers and promote the agricultural industry and rural economic development. Shareholders of rural banks do not have to be from the specific area(s) served by each bank.


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