The listing of China's Big Four state banks will set off a chain reaction that will affect everything from the future of the country's failing state-owned enterprises (SOE) to retired employees' monthly cheques.
Its success or failure depends on the government's willingness to swallow the bitter pill of bank reform, which will be expensive and time-consuming.
'Bank reform is a top priority for this Chinese administration,' said David Chin, a managing director at UBS Warburg in Hong Kong. 'It's not going to be straightforward, but they are definitely heading in the right direction.'
China's Big Four state banks - China Construction Bank, Bank of China, Industrial and Commercial Bank of China, and the Agricultural Bank of China - dominate the economy. More than 80 per cent of all financial transactions flow through their coffers.
Until 1979, the mainland had only one bank - the People's Bank of China. The next four years saw an explosion in finance that led to the creation of the four leading state banks and a host of other lenders.
In addition to the Big Four, there are now three policy banks that lend to specific state projects, 10 joint-stock commercial banks, 836 urban credit co-operatives, 50,000 rural credit co-operatives and 170 foreign financial institutions.
The Big Four control 67 per cent of China's financial assets. On average, each has US$400 billion in assets, employs 415,000 people and maintains 15,000 to 58,000 retail branches across the country, according to Deepak Bhattasali, an economist with the World Bank. Their 7.2 trillion yuan (HK$6.74 trillion) in loans constitute 67 per cent of the country's outstanding loans.
