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The Chinese Banking System Profits from Being a Monopoly

A-Finance recently published an article analyzing the fact that the profit that the Chinese banking system makes is greater than that of the tobacco industry or the oil industry. According to CBRC (the China Banking Regulatory Commission), in the first three quarters of the year 2011, the increase in the banking system’s annual profit was 35.4%. Those who work in the banking industry have an average income that is dramatically higher than any other industry in China. An analysis showed that the primary sources of profit are the high interest differential, frequently collected fees, and a massive amount of “wealth management” products. The net interest differential contributes from 75.7% to over 90% of the banking system’s annual income. The differential is the highest in the world and is determined by the government. Meanwhile, 79% of the services that banks provide are fee-based. Today, these fees are ten times higher than they were ten years ago. Chinese banks are considered monopolies both as institutions that take deposits and as lenders.

Source: A-Finance, February 6, 2012