Chinese banking model unsustainable: Daily

Submitted by admin4 on 22 February 2012 - 4:23pm

By IANS,

Beijing, The profit model of Chinese banks that encourages growth by stipulating a cap on deposit and lending rates is unsustainable, a daily said Wednesday.

The commercial banks posted a net profit of 1.04 trillion yuan ($0.17 trillion) in 2011, rising 36.34 percent year-on-year from 763.7 billion yuan in 2010, the China Daily quoted the Economic Daily as saying.

The People's Bank of China, the central bank, is loosening the restrictions on deposit and lending rates to tackle inflation, which will result in rising cost of funds, said Chen Xian, executive president of the Economics School of Shanghai Jiao Tong University.

Experts claim the banking reforms, better management and operations should be the top contributor to banks' profit growth. The proportion of profit brought by intermediary businesses rose nearly 20 percent in 2011, compared with the past single-digit shares.

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