China should sell state shares in mid-tier banks -Minsheng vice chairman

BEIJING, March 11 Mon Mar 11, 2013 8:07am EDT

BEIJING, March 11 (Reuters) - China should sell down state-held shares in mid-sized commercial banks to less than 50 percent, the largest shareholder in the country's only sizeable privately controlled bank told reporters on Monday.

China said last year it would allow private investors greater entry into a number of restricted sectors, including finance. China's banking sector is dominated by big state-owned banks, and the state also owns a majority share in nine of the 10 second-tier commercial banks.

"For these mid-sized banks, it wouldn't be a big deal for the state share to fall below 50 percent," said Liu Yonghao, who is vice chairman of Minsheng Bank and owns its biggest shareholder.

"Because the big state banks already dominate 70 percent of China's financial sector, even if these mid-sized banks were 100 percent private, the state would continue to control the sector."

He wouldn't comment on whether he, or Minsheng, would be interested in buying state shares.

"If these banks are opened further, it won't affect the nation. There will only be good results, no negative results," he said, addressing why he felt the government should start a stake selldown targeting mid-tier banks.

"The big state banks are too big. I hope we can gradually change them."

Liu is a deputy to China's legislative body, which is currently holding its annual meeting, and uses his position to lobby for rural and private business concerns.

Liu, a mathematics teacher who began selling eggs with his brothers in the early days of China's market reforms, said that further privatizing the mid-tier banks would allow more banking support for small or private firms, which currently have difficulty getting loans from state-owned banks in China.

Liu's egg business grew to become New Hope Group, which today is China's largest private agribusiness focusing on animal feed, poultry and meat.

Liu said he was optimistic about further reform under China's new administration, which will be formally named this week.

"We can feel that in the new administration China will keep emphasis on reform and opening. Financial reform and opening is of key importance, because most of the banking industry is government-controlled," he said.

China has already taken steps in recent months to partially liberalise interest rates, viewed by many as a necessary reform in moving to a more market-based economy. Traditionally, banks have relied on the spread between state-set deposit and lending rates to make money.

Market-based interest rates would narrow that spread, Liu said, forcing banks to shift their focus to providing more services to customers in order to compete.

Minsheng's rivals among the mid-sized commercial banks include China Merchants Bank and Pudong Development Bank. (Reporting By Lucy Hornby and Coco Li; Editing by Ken Wills)