OREANDA-NEWS. June 06, 2011. Recently, the serial report on situation and policy "Prosperous Banking Industry: A Glance at the 11th Five-year Plan Period and An Outlook on the 12th Five-year Plan Period" was jointly held by the State Organs Work Committee of the CCP Central Committee and China Banking Regulatory Committee. At its 6th session in Beijing, Mr. Xiang Junbo, Chairman of Agricultural Bank of China Limited (ABC), made a report titled "Speed up Financial Innovation and Enhance Sustainable Development of the Banking Industry", reported the press-centre of ABC.

According to Mr. Xiang Junbo, the history of the banking industry is, in nature, a history of financial innovations. He summarized the financial innovations in the banking industry since the 1960s into three phases, namely "financial innovations focusing on regulatory evasion", "financial innovations centering on risk mitigation" and "derivative-oriented financial innovation". He drew from inclusive materials and cases a basic conclusion that financial innovations not only promoted the development of the banking industry itself, but also constituted an essential element in economic growth. However, excessive financial innovations regardless of actual position of the real economy would induce greater risks and finally sow the seeds of financial crisis.

Mr. Xiang Junbo reviewed the achievements of China's banking industry through financial innovations within more than 30 years after the reform and opening-up. The 11th Five-year Plan period saw the most rapid and active financial innovations after the reform and opening-up. However, the level of the innovations was still lagging behind that of internationally advanced peers.

Mr. Xiang Junbo also made a systematic summary of ABC's innovations in financial services related to Sannong (agriculture, rural areas and farmers) since 2007 and classified them into five aspects: the first is the innovations of Sannong business structure. ABC established the County Area Banking Department to ensure specialized department, personnel and resources for Sannong financial services. The second is innovations on Sannong financial products to satisfy multi-tier needs for Sannong financial services. The third is innovations on financial service channels to improve the availability of basic financial services. The fourth is innovations on business development mode highlighting "coordination between urban and rural areas and promotion of services in rural areas with the help of business in urban areas". The fifth is innovations on management patterns to settle such problems as information asymmetry, underdeveloped incentive and restraint measures, and high risks of Sannong loans. ABC's explorations in the past three years have proved that a large commercial bank is fully capable of achieving efficient service, controllable risk and sustainable development through systematic innovations.

Mr. Xiang Junbo also pointed out that the relations among innovations and risks, regulations and monetary policies must be rationalized. The 12th Five-year Plan period will witness great development of China's financial innovations, and the following five key aspects must be well-handled if the commercial banks intend to realize sustainable development: 1. following closely the upgrading of resident consumption structure; 2. keeping up with the trend of overall planning of urban and rural development; 3. following the pace of scientific and technological innovation; 4. following the reformation of financial system; 5. monitoring closely changes on the financial market.

The session was attended by CPC members of CBRC, representatives from the state macroeconomic regulatory authorities and delegates of the large and medium-sized banking institutions in Beijing.