In terms of total assets, all four SCBs rank among the world's 40 largest. Quantity, however, does not mean quality. These banks have proved inefficient in allocating funds to China's economy. All four have low profitability. Moreover, the size of their bad-loan portfolios has been among the world's largest.

Capital Controls Are Crucial to Banking Stability
Although appearances and reality can differ sometimes in Chinese banking, even the appearances look problematic. The latest official data show the average ratio of nonperforming loans to total loans for China's big four banks as

15 percent in first quarter 2005, down from 20 percent at the end of 2003 (Table 1)1 While these ratios are well above those in most countries, private estimates have placed total Chinese impaired loans (including those already taken over by the government in trade for bonds) in the range of 50 percent of bank assets.