Up to the end of December 2005, the total assets of China's city commercial banks had topped RMB 2.04 trillion, increased by 19.4%; the total liabilities was RMB 1.95 trillion, up 18.6%. In 2005, China's city commercial banks explored and innovated on displacement and operations by encircling the assets and removing the historical burden, which made great progress.

In 2005, China had more than 30,000 banking or financial institutions, including 113 city commercial banks. Known as "the third echelon of China's banking industry" and stemmed from the shareholding reform of former urban credit cooperatives, China's city commercial bank is a local joint-stock commercial bank established by local government, enterprises and residents. It is also a first-class legal entity merged from numerous legal organizations, serving for the development of local economy. Taking the establishment of Shenzhen City Cooperative Bank as the starting point in July 1995, China's city commercial banking began its arduous course on Chinese financial platform. From the view of banking functions, city commercial banks are commercial financial service institutions, so it should firstly have common characteristics of commercial banks. At the same time, because of its special development course, China's city commercial banks have their own unique characteristics, i.e. China's city commercial banks are local commercial banks as well as joint-stock commercial banks.

Along with the constant innovations of financial products and financial services, the crossover and combination among banking, securities and insurance industry actually broke the boundary of individual operation. Mixed operation is developing smoothly, establishment of fund companies, assets securitization, personal financial services from the banks, and investment-related insurance are the typical examples. The year of 2006 witness the further loose of financial regulation together with the debut of new products and services. Due to the huge scale of assets, network and clients, the advantages of banks in mixed operation is obvious, which will help to greatly increase the intermediate services revenues of commercial banks.

2006 is crucial for the development of China's banking industry. With the continuous deepening reform of the Chinese financial system, particularly, following the end of transition period, the Chinese banking industry faces many opportunities and challenges from the profound environment changes.

China's city commercial banking industry will face fierce competition with the completion of the transition period of China's entry into WTO; meanwhile, the gradual opening of the market to foreign banks will stimulate more competition. The challenges from foreign banks make domestic banks not merely face a problem of development, but also a key problem concerning survival. From the view of products, China's city commercial banks are calling for more clear market positioning, high-quality products, stronger comprehensive services to deal with challenges. Along with the development of China's economy, the market scale of personal banking services will be gradually expanded. At the same time, individual demand for banking services tends to be multiple; the significance of personal banking services will be gradually improved in banking industry.

Up to the end of December 2005, the total assets of China's city commercial banks had topped RMB 2.04 trillion, increased by 19.4%; the total liabilities was RMB 1.95 trillion, up 18.6%. In 2005, China's city commercial banks explored and innovated on displacement and operations by encircling the assets and removing the historical burden, which made great progress. By the end of 2005, the average capital adequacy ratio of China's city commercial banks was 5.135, growing 3.82 % over the year of 2004. The number of city commercial banks with the capital adequacy ratio up to 8% rose from 18 in early 2005 to 36; the average provision coverage ratio of China's city commercial banks hit 23.75, with a year-on-year increase of 8.9%. Among them, the provision coverage ratio of 10 city commercial banks including Ningbo Commercial Bank and Suzhou Commercial Bank exceeded 100%. Up to the end of 2005, the non-performing loans of China's city commercial banks totaled RMB 84.2 billion, decreasing RMB 21.7 billion compared with 2004; the average non-performing loan ratio was 7.73%, dropping 3.96% over the end of 2004 and near 30% over 5 years ago. All these facts proved that the asset quality of city commercial banks has improved.