Comment

In December 2001, China became a formal member of the World Trade Organization (WTO), an event which led to foreign banks in China enjoying a new and fully open era. Since then, the development of the local banking system has gone through two stages.

The first stage was from 2001 to 2006. During this stage, China's banking industry began to implement its commitment to the opening-up policy. The second stage, from the end of 2006 to now, was when the banking market totally opened to foreign institutions, allowing foreign banks unrestricted access in terms of region, business and customers.

In the past decade, China's accession to the WTO has had a far-reaching effect on the development of the financial market in China and has brought more profit-making opportunities to local commercial banks.

The entry of foreign banks greatly accelerated the improvement of the local banking system. It helped local banks attract more direct foreign investment, improve their managerial and administrative expertise and increase their efficiency. Besides, it helped speed up China's financial innovation and the internationalization of the local banking sector.

However, being a member of the WTO is not always an advantage. Foreign banks brought heavy competitive pressure to bear on local banks when they entered the Chinese market, and this had an impact on the country's economy. The more open financial environment led to some undesirable results. It caused a brain drain and the loss of customers from Chinese banks, affected the stable and healthy operation of the banking industry and challenged the financial monitoring system.

With the banking industry opening up to foreign capital, the amount, volume and range of business done by foreign banks have been widened. This means that the task of supervising foreign banks has become heavier and heavier.

After the financial crisis in 2007-2008, we had to admit that our ability to supervise the banking sector was not strong enough and that defects did exist.

Although our authority has already taken many effective measures, it still needs to take further action to prevent excessive risk accumulation and maintain the stability of the financial system.

Overall, since joining the WTO, China's banking industry has made great progress in aspects such as scale, system, product, financial affairs and its international network. In the future, China must pay close attention to global finance and develop effective supervision to guarantee a better future for our banking industry.

The author is director of the banking industry research center at Central University of Finance and Economics in Beijing. The opinions do not necessarily reflect those of China Daily.