Weakest of the Big Four wants equal treatment and a listing in Hong Kong
The central bank chief has proposed dismantling the Agricultural Bank of China, the weakest of the big four state banks, but the lender is fiercely opposed to the idea and wants to list in Hong Kong.
After two years of bitter debate, Zhou Xiaochuan earlier this month made two proposals to the State Council for reforming the Agricultural Bank, which has the largest debts of the big four.
One involves restructuring it in the same way as the other three and preparing it for listing in Hong Kong and the mainland. The other involves abolishing the Beijing headquarters and putting its branches under the control of their respective urban and provincial governments, turning it into a large number of local banks.
To help these banks start with a clean slate, the provincial and central governments would take over its bad debts, estimated at between US$60 billion and US$70 billion, equal to the total of the other three big state banks - China Construction Bank, Bank of China and Industrial and Commercial Bank of China.
Mr Zhou has concluded that Agricultural Bank's debts are too big and that the bank cannot be reformed. Splitting it into small units would involve closing the Beijing head office and sending its staff to the local branches or making them redundant.
The China Business Post at the weekend reported that the State Council was most likely to accept the dismantling proposal. Agricultural Bank officials were unavailable for comment.