The Chinese retail banking industry in the post-WTO scenario and the how the countrys accession to WTO and consequent banking reforms are altering the retail banking landscape.

Reforms in the banking sector are helping China’s banks to shift from traditional commercial banking and focus more on developing the retail segment. Much of the profitability over the coming years is going to come from lending to small businesses and the affluent sections. But its biggest driver will be the arrival of foreign banks, which has become inevitable after China’s accession to WTO.

Domestic banks, meanwhile, are being encouraged by the Chinese government to expand in overseas markets and list on the local stock exchanges. This is expected to help banks raise capital to alleviate some of the burden of non-performing loans (NPLs) or bad loans, which remain substantial despite the government’s attempts to recapitalize the big four state-owned banks.

The banking market is dominated by the four state-owned commercial banks - Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China. Retail banking in China is a fast-growing and profitable business. A shift in profit mix from corporate to retail is driving the Chinese retail banking industry. The growth of domestic savings, increase in the number of high net worth individuals (HNWI) in the recent years, and increasing presence of foreign bank in China are some of the factors driving growth in the sector. However, high level of NPAs, undervalued yuan exchange rate, as well as exponential rise of forex reserve, represent major challenges. The Chinese banking industry is expected to witness an annual growth rate of 10%.