Allowing private investors to operate private banks promotes the market reform of the Chinese financial sector, says an article in China Business News. Excerpts below:

The first five private banks of a pilot program in Tianjin, Shanghai, Zhejiang and Guangdong obtained their “birth certificates” recently. Some famous Chinese private investors are participating in the setting up of the banks.

It is a meaningful step by the Chinese government to finally turn on the green light to allow private investors to set up banks, after it said nearly a year ago that it would encourage them to do.

The presence of private banks is expected to stimulate competition in the Chinese banking industry, which has long been dominated by State-owned banks.

Private investors’ entry into the banking industry can reduce the financing costs of the real economy and solve the structural shortage of financial resources. In practice, the private banks can provide cash-thirsty private businesses with badly needed funding.

On the other hand, after Chinese private enterprises become more competitive, they can help promote market competition in the financial sector.

The Internet provides new turf for private banks to build up their territory and strength.

The government should also strengthen its supervision and do its best to ensure financial security for the State and the public after allowing private investors into the banking business.