BEIJING (AP) — Premier Wen Jiabao, China's top economic official, says its state-owned banks are monopolies that must be broken up, acknowledging mounting economic and political pressure to reform an industry whose vast profits are fueling public anger.
Wen's comments Tuesday suggest Beijing sees a growing political danger from its failure to carry out long-promised reforms of state banks, which pay minimal interest on deposits and made tens of billions of dollars in profit last year. Public resentment has risen as China's rapid economic growth slows and fears of job losses rise.
Speaking Tuesday to businesspeople, Wen said Beijing has launched reforms aimed at serving entrepreneurs better by opening up banking to private investors, China National Radio reported. It gave no indication of a possible timeline for further reforms.
"Our banks make money too easily. Why? Because a small number of big banks have monopoly status," Wen said, according to a transcript on the CNR website. "To allow private capital to flow into finance, basically, we need to break the monopoly."
Wen spoke during a visit to Fujian province in the southeast, a center for export-driven private enterprise. The government announced last week it will launch a pilot project to expand private lending in Wenzhou in neighboring Zhejiang province after a wave of defaults on underground lending that supported businesses there.
"I think those elements in Wenzhou that succeed need to be expanded nationwide and can immediately be introduced nationwide," Wen said, according to the transcript.
Communist leaders have long used Chinese banks to subsidize state industry, shifting wealth from savers to politically favored companies. Entrepreneurs produce most of China's new jobs and wealth but get only a small percentage of bank loans.
That has fueled resentment, especially as the "big four" major state-owned commercial banks, which account for about half of deposits, report record profits.
China's biggest lender, Industrial & Commercial Bank of China Ltd., earned $33.1 billion in 2011, ranking it among the world's most profitable companies. Other major banks — Bank of China Ltd., Construction Bank of China Ltd. and Agriculture Bank of China Ltd. — reported similar windfalls.
The government sets deposit and minimum lending rates, giving banks a guaranteed margin of about 3.5 percent. It has begun allowing lenders to charge more for some commercial loans, which has increased profit margins still further.
The World Bank and the Chinese government's own researchers have added to calls for reform, warning economic growth could slow sharply unless banks become more efficient and lend more to support the dynamic private sector.
The government has repeatedly promised over the past decade to make banks more market-oriented and to pay higher deposit rates but has yet to make major changes. Analysts expect little progress for at least another year until a once-a-decade transfer of power to a younger generation of leaders is complete in early 2013.
Wen was seen as a reformer with the public's interests at heart when he became premier in 2003. But change has been slow and entrepreneurs and foreign businesses complain Beijing has backtracked in some areas as it tries to build up dominant state-owned companies in industries from energy to banking.
Wen, due to step down as premier in early 2013, apologized last month in a nationally televised news conference held at the end of China's annual legislative session for failing to move faster on reform.