IN a significant move in their development as commercial banks, two of China's largest institutions have been chosen to take part in the country's experiment with market-based housing for state employees.
The Industrial and Commercial Bank of China (ICBC) and the People's Construction Bank of China (PCBC) will join the Yantai Housing Savings Bank (YHSB) as financial intermediaries to mobilise funds and provide long-term mortgage financing at competitive rates to 1.65 million workers in four cities by the end of the decade.
Beijing, Chengdu, Ningbo and Yantai are the cities participating in the US$950 million World Bank-backed scheme, which is designed to remove the costly obligation of state enterprises to provide virtually free housing to employees.
ICBC branches will be involved in all four cities, with PCBC in all except Yantai, which will be served by YHSB. If necessary, other financial intermediaries acceptable to the World Bank may be allowed to join the scheme later.
ICBC - China's largest bank which holds more than a third of all banking assets in the average city - is a relative newcomer to the home financing business, having joined the game only in 1991, when it began to offer short and medium-term loans for housing and other real estate projects.
But through its participation in the scheme, ICBC will arrange for its branches in the four cities to start offering long-term mortgage loans, which will diversify its portfolio, which is heavily dominated by short-term loans.