Development review of China’s banking industry in 2021 and prospect in 2022 From Deloitte Consulting

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2021 is the first year of the 14th five year plan. The Communist Party of China ushers in its centennial birthday, realizes the first Centennial goal and starts a new journey towards the second Centennial goal. Over the past year, facing the complex and severe situation at home and abroad and many risks and challenges, the party and the government led the whole country to make joint efforts to coordinate epidemic prevention and control and economic and social development, and made remarkable achievements. China’s banking industry has made remarkable achievements in overcoming the impact of the epidemic, improving its ability to serve the real economy, preventing systemic financial risks and achieving high-quality development. By the end of 2021, the total assets of commercial banks had reached 288.6 trillion yuan, a year-on-year increase of 8.6%, the growth rate fell back to single digits, and the asset expansion in the financial system returned to a low level; The balance of non-performing loans was 2.8 trillion yuan, the non-performing loan ratio was 1.73%, down 0.11 percentage points from the end of 2020, and the quality of credit assets remained stable; RMB loans increased by nearly 20 trillion yuan, the balance of medium and long-term loans in the manufacturing industry increased by nearly 30% year-on-year, scientific research and technology loans increased by 28.9%, green credit increased by 21%, and the growth rate of inclusive small and micro enterprise loans was close to 25%, effectively supporting the recovery and development of the real economy; Risks in key areas have been continuously controlled, the macro leverage ratio has decreased by about 8 percentage points, the scale of high-risk shadow banks has continued to be significantly reduced, the disposal of non-performing assets has achieved remarkable results, the implicit debt situation of local governments has tended to improve, the real estate foam financialization momentum has been fundamentally reversed, and the resilience of the banking industry to prevent external risk shocks has further improved.

Looking forward to 2022, China’s social and economic development faces major opportunities and challenges at the same time. The Communist Party of China will hold the 20th National Congress, which will have a far-reaching impact on the future development of China’s economy and society; The COVID-19 is expected to be effectively controlled by the end of 2022. To achieve the “double carbon” development goal and cope with climate risks, we need to give further play to financial strength. These are favorable external environmental factors for the development of China’s banking industry. However, global geopolitics still faces major uncertainties. China’s economy still faces three major pressures of “shrinking demand, supply shock and weakening expectations”. Technological progress and changes in regulatory policies continue to impact the financial development environment and market competition pattern. These external environmental factors make the future development of China’s banking industry continue to face new challenges. To seize development opportunities and meet risks and challenges, China’s banking industry needs to adhere to the development direction of “serving the real economy, preventing and controlling financial risks and deepening financial reform”, and explore new profit growth poles in the process of business model transformation; Properly handle the relationship between asset scale and asset quality to achieve steady and sustainable growth; Attach great importance to risk prevention and control and make full preparations for the worst case that may occur; Earnestly fulfill social responsibilities and fully integrate the requirements of environment, society and Governance (ESG) into the whole process of operation and management; Continue to deepen digital transformation and comprehensively improve the quality and efficiency of development by using digital technology; Continue to invest in talent training and continuously improve the leadership and professional level of financial talents.

The development review of China’s banking industry in 2021 and outlook for 2022 is the fourteenth part of a series of analysis reports by Deloitte’s China financial services research team. This report covers the review of the macroeconomic and financial situation in 2021, the performance analysis of listed banks in 2021, the observation of listed banking business in 2021 and the discussion of hot topics in the industry. Taking 10 representative domestic commercial banks as samples, the report systematically analyzes the profitability, assets, liabilities and capital strength of China’s listed banks, combs and observes their business development, business model and regulatory environment changes, shows the achievements of China’s banking industry in 2021 and looks forward to the direction of future development. At the same time, the report also selects six overseas global systemically important banks (which rank 5th to 10th in the 2021 list of the world’s 1000 largest banks by the British banker magazine) for analysis, so as to learn from and draw on the excellent practical experience of international peers. In addition, we deeply analyzed the key and hot topics such as the strategic deployment of the banking industry in the first year of the 14th five year plan, the interpretation and thinking of the new regulations on corporate governance, the reform and development practices and suggestions of local agricultural cooperative institutions, the analysis of financial culture, the exploration of banking financial technology subsidiaries, and accelerating the layout of the gold track of wealth management, so as to provide unique insights and insights. We believe that this research report will provide a valuable reference for domestic commercial banks to open a new chapter in the new journey of the 14th five year plan.

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