Wednesday, 6 February 2008

Banking in China: Anecdotal evidence of incompetence

One of my over riding fears for China's continued prosperity is the state of the Chinese banking system.

I suspect there are massive bad loan provisions being covered up that could unravel at any time.

This story from Chinalawyerblog says it all. This is a good example where one should take micro level evidence and project it to the macro-level. China has a long way to go that there should be no doubt.

Lose Your Wallet? China Gets Stuck [China Lawyer Blog]

This is the innocent story of a lost wallet in China. After successfully and efficiently closing bank accounts from the US and Hong Kong our man goes local:

Finally, dealing with Chinese was exactly what dealing with China itself entails. China is a land of bureaucracy and useless rules, and everyone who lives here spends their life constantly trying to find ways around these rules. I had to go to five banks to get my Chinese ATM cards replaced. Each required me to a) wait at least 45 minutes, b) repeatedly enter my password, c) speak with 3+ staff members, d) get multiple forms stamped with red official stamps, and e) leave with a hand of papers and a date 7-14 days in the future to return and wait again in line to get my card and my money. Here are the specifics.

First, I went to China Construction Bank. They knew me from daily transactions there, but explained that national law here requires that I wait 7 working days after a card is lost to get it replaced. They charged a US$1 fee to replace the card itself, and since I didn’t have any money they just deducted it from my account, but like the other banks did not let me withdraw money from the account though I was broke. That was a major inconvenience, but the manager just offered to lend me US$30 in the interim.

Second, at China Industrial and Commerce Bank I had a 65 minute wait, including time spent in the “advance waiting area.” The teller had trouble finding my account using my passport, and when he did find it he discovered that they had originally entered my name on their computer without my middle name, although the passport was the same number of course. As a result, the teller repeatedly consulted with the bank’s in-house management, and they concluded that in addition to seven working days, they would need an extra week to confirm that the original documentation I submitted to open the account was the same as the passport I was there showing to them. This was crazy since the name and passport matched, and because three employees there recognized me. So they told me to return in 14 business days, then realized I had not paid the US$1 fee to get a new card. I told them I had no money, since I didn’t have access to the account, and rather than deducting this paltry amount from my account, they told me that without the US$1 to cover the cost of a new card I would have to start this process again after finding someone to give me US$1, then return to the bank, line up again, and probably go through the whole haggle with the boss. Eventually, one of the employees who recognized me just gave me the US$1 fee.

The third bank was CITIC. Here, I encountered the equivalent to the “unnecessary bottleneck-breakthrough” situation that drives foreigners crazy in China. The teller pointed out that my account was opened at a branch 500 meters away, and that I was therefore required to go to that branch to get the card reissued (imagine if I opened it in different province). When I protested that I wanted to get the matter resolved at this branch, she suggested a workaround: she advised me to open a new account with her, put the new account on my same Internet banking service as my old account, transfer the money on the internet from the old account to the new account, then permanently ignore the old account. This worked perfectly, although it made me sick to realize that these people were enforcing rules then helping me find ways to avoid them.

The fourth bank was China Merchants. This was a repeat of the CITIC bank, but it took more time since the bank was busier. We created a new account and transferred everything from the old account to the new account to avoid the mandatory 7 day waiting period. It took me an extra hour to do this, though, since the tellers encountered repeated errors identifying my new account, since their internet banking system differentiates “Jeff Brauer” and “jeffbrauer” (no space) and it deletes spaces on its own.

Finally, the last bank visit of the day was Minsheng bank. This was the only bank were I didn’t lose the card, although since it had been so long since I last used it I didn’t remember the password. The result? New passwords, like new cards, require a 14 day wait, even though I had my passport there, and I couldn’t withdraw any money from the account.

The result? China will be a century behind the USA for a very long time, I think. Also a great chance for foreign banks to compete here if the PRC government ever gives them that opportunity.


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1 comment:

Bill said...

I am now absolutely sure the China will be an economic powerhouse real soon now.