Chinese Premier Wen Jiabao of China said on Tuesday that the nation’s biggest state-run banks have too much power and ought to be broken up because they earn far too much money.
The remarks, delivered during a national radio address while he was travelling in southern China, were unusually bold and appeared to be a direct challenge to the Communist Party leadership to speed up reforms of the nation’s financial system.
According to China National Radio, Wen said: “Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital.”
“That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly,” he added.
Eswar S. Prasad, a former International Monetary Fund official who teaches at Cornell University, said Tuesday that Wen’s remarks “reflect a growing consensus among reform-minded officials that breaking up the large banks may be an essential step to reduce their political influence and pave the way for broad, much-needed reforms to the financial system.”