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Growth slows as banks
navigate transformation
The banks category declined 6 percent in value in the BrandZÔ Top 100 Most Valuable Chinese Brands 2017, following a modest increase in the 2016 ranking and a steep decline a year earlier.
After a decade of mostly rapid growth, the reversal of fortune resulted from China’s rebalancing to an economy more dependent on consumer spending than on infrastructure investment largely funded by state-owned banks.
Slower economic growth left the banks with too many under-performing loans. And government attempts to stimulate growth have lowered interest rates and reduced fees, impacting bank profitability. As banks adjusted to this “new normal,” they focused on new priorities, such as building retail businesses, offering wealth management services, and expanding online.
All 10 banks in the ranking declined in value, except for China Minsheng Bank and China CITIC, a newcomer to the ranking. All but China Minsheng Bank are State Owned Enterprises (SOEs). The banks represent 10 percent of the brands in the ranking and somewhat less than a fifth of the total value, down from almost a third in 2014. With the banks removed from the BrandZÔ China Top 100, the ranking rose 9 percent rather than 6 percent.
Seven banks rank in the BrandZÔ China Top 25: ICBC, China Construction Bank, Agricultural Bank of China, Bank of China, China Merchants Bank, Bank of Communications, and China Minsheng Bank. The other banks in the ranking are: Industrial Bank, China Everbright Bank, and China CITIC. The newcomer bank now meets the BrandZÔ China Top 100 eligibility requirement that retail banking comprise at least 20 percent of earnings.
As a strategic response to the challenging economic environment, China CITIC Bank joined Baidu, the giant search engine brand, to open China’s first direct bank, Baixin Bank. The combined entity is expected to leverage the banking expertise of CITIC, and its over 1,350 physical outlets, with the online capabilities and reach of Baidu.
The development of online banking is one of the strategies intended to help position commercial banks during the transition to a consumer-driven economy. Online banking grew at a rate of 12.3 percent though the first half of 2016, according to the Chinese Internet Network Information Center (CINIC).
Other banks also integrated off line and online offerings (O2O). ICBC, for example, developed products for online banking (ICBC Mobile) and online commerce (ICBC Mall). But the banks also face new competition, and opportunities for cooperation, as non-banking organizations offer financial services, including Baidu, e-commerce leader Alibaba, and Tencent, the Internet company and Number 1 brand in the BrandZÔ China Top 100.