3 challenges China banks will face amidst changing external environment

Slowing economy is one.

Barclays attended the Annual Banking Conference 2013 hosted by the Hong Kong Institute of Bankers.

Ma Weihua, former President of China Merchants Bank and current Chairman of Wing Lung Bank, discussed the challenges facing the China banking industry and forthcoming reforms.

Here's more from Barclays:

The external environment has changed drastically in the past two years, leaving Chinese banks with enormous challenges down the road.

The changing environment, according Mr. Ma, includes mainly three aspects, 1) slowing economy, 2) constrains from stakeholders; and 3) ever changing customer appetite.

1. Slowing economy: economic growth has slowed to c7% recently from average 10% in the past 30 years due to the diminishing traditional economic drivers such an aging population, falling saving rate and weak external demand.

2. Challenges from stakeholders: 1) Regulations, e.g. new capital rules, PBOC’s macro-prudential supervision (total social financing, differential RRR, etc): 2) Shareholders contributing less capital; 3) Employee training and retention.

3. Changing customer needs due to economic and social development: Growing financing needs of SMEs (estimated demand of RMB20trn), significant growth potential in wealth management services in China, and consumer financing needs as domestic consumption increases.