A century of glorious achievements through continuous diligence and commitment

In the first half of 2021, the global economy maintained recovery momentum. China achieved positive results in epidemic control and prevention as well as economic and social development, presenting a long-term, steady trend of economic growth; alongside with the continuous recovery and accelerated growth in industrial production, high-tech manufacturing, services sector and exports, while domestic driving factors including investments in consumers and manufacturing sectors have gradually strengthened; all of these factors have together boosted the economic growth significantly.

In 2021 H1, China’s GDP and PPI increased by 12.7% and 5.1% year-on-year respectively. In the meantime, the Chinese government has meticulously rolled out the macroeconomic policies to maintain the continuity, stability and sustainability of these policies. At the end of June 2021, the balance of broad money (M2) was RMB231.78 trillion, up 8.6% year-on-year — 0.3 percentage points higher than the growth of the previous month and 2.5 percentage points lower than the growth of the same period last year; the balance of local and foreign-currency loans reached RMB191.62 trillion, up 11.9% year-on-year. As the economy improves steadily, the Chinese banking sector has also show a sound momentum of growth. Banks have been playing an active role to support the recovery of the real economy and address different kinds of risks and challenges, while at the same time they have explored the new drivers and new ideas and achieved some good results. Overall, the business performance of China’s banking sector remains stable in 2021 H1, with a reasonable growth in asset size, further optimized credit structure, continuous growth in profitability, improved asset quality and the overall capital has been maintained at an adequate level – laying a good foundation for the banking sector to achieve high quality growth during the 14th Five Year Plan.

In 2021 H2, we expect recovery of the global economy will continue but uncertainties remain. With the strong commitment to the principles from the fifth plenary session of the 19th Central Committee of the CPC and the Central Conference on Economic Work, China’s banking sector will enter into a new stage of development with a comprehensive, precise and full implementation of the new ideology of growth thinking. To serve and construct the new development landscape, the banks will continue strengthening their support to the real economy and address the financing needs in the market effectively through fees reduction and other beneficial policies for their customers, and embark the new journey of high quality growth.

The report provides a mid-year economic and financial sector review and an interim performance analysis of the Chinese Listed Banks of the year 2021; followed by a series of hot topic discussions. We have selected 10 representative commercial banks in China for the purpose of analysing the overall interim performance of the banking sector in 2021. The report also provides an overview of the achievements of China’s banking sector in 2021 H1 and industry outlook based on our systematic analysis of the profitability, assets, liabilities and capital positions of the Chinese listed banks, together with out observations of the business development, operations and regulatory changes in the sector.

Considering the importance of large commercial banks in the global banking industry, we also included 6 non-Chinese GSIBs out of The Banker's Top 10 World Bank 2021 in our analysis to understand and learn from the excellent experience of the international peers. Furthermore, we shared indepth insights into the major hot topics in banking at the beginning of the 14th Five-year Plan period, such as strategy implementation and management, internal controls and compliance management, the recovery and resolution plans for systemically important financial institutions, Hong Kong banking sector overview and the development of Chinese banks in Hong Kong, analysis of fintech investment and adoption, and how to take the lead and get ready for the competition in wealth management. We believe that this report will provide valuable insights for Chinese commercial banks to embark the new journey during the 14th Five-Year Plan period.

Contents

1. 2021 Mid-year Economic and Financial Sector Review

2. 2021 Interim Performance Analysis of the Chinese Listed Banks

2.1. Profitability

2.2. Assets

2.3. Liabilities

2.4. Capital position

3. 2021 Interim Business Review of the Chinese Listed Banks

3.1. Committed to improve the quality and effectiveness of services to support the real economy

3.2. Credit risk management remains an arduous task due to increasing non-performing loans in certain industries

3.3. The rise of wealth management business: ushering in a new era of coopetition

4. Hot Topics

4.1. Key observations of the strategy implementation and management in banking sector during the first year of the 14th Five-Year Plan period

4.2. Recommended actions plan for the Year of Internal Controls and Compliance Management

4.3. Establishing the "living will" mechanism and decoding the recovery and resolution plans

4.4. Hong Kong banking sector overview and the development of Chinese banks in Hong Kong

4.5. Stay ahead and embrace the transformation journey – analysis of fintech investment and adoption in the Chinese banking sector

4.6. Seize the opportunities and take the lead – act fast and get ready for the competition in wealth management