Rapid changes in China? Don't bank on it

The following is a guest post from a good friend of mine, and current CCTV 9 news anchor James Aitken. We are posting it with his permission:

I thought about starting this piece with the phrase, "I'm no banking expert, but...", then this one came to mind: "I lost track long ago of how many times I've tried to give Chinese banks my money." Yeah, that works.

My latest adventure in China's financial industry started with a straight forward task: deposit money into someone else's account. As I traipsed into the bank branch, I headed straight to the get-ready-to-be-here-a-while ticket machine and pressed the button. 1282. I glanced up at the scrolling red computer numbers. The biggest number is 1254. Not bad. I park myself on a bench, and because this particular branch doesn't have a wall-sized TV screen running Tom and Jerry cartoons, I pull out my mobile listening device and begin my wait with the sounds of a scraggly-haired rock bank thumping in my ear drums.

Every time I make my way into a Chinese bank, I'm reminded of the massive transformations that have been going on behind the scenes. Besides my many personal adventures, I've read and heard a great deal about the challenges and changes that this country's banking system is facing. They've been going through immense restructuring. I don't know how the bottom line looks at the major banks these days, but I am quite aware of the problems they've been grappling with. Hundreds of millions of bank customers are reminded of this everyday. The poor customer service comes in many forms: interminable waits, grumpy, underpaid staff, or in my case, an Internal Technology system that is basically just Internal. Up till this point, customer service improvements at some banks have amounted to hanging up large TV screens to show cartoons. Other banks offer free cups of water.

Essentially, these long-standing issues can be boiled down to a protracted case of misplaced priorities. When various high-level bank managers have been interviewed and asked to explain the poor levels of customer service, they've responded that customer service hasn't been important to the banks because, well, customers aren't that important. The banking sector is emerging from an imposed environment of extended isolation where the concept of competition has simply been non-existent. Another key factor is simple economics. The banks make huge sums of money from a few clients, ie. big companies, government agencies etc. The rest of us commoners, hundreds of millions of us commoners, really don't add much to the bottom line. Fair enough.

The banks I've dealt with, here and abroad, generally aren't in the habit of doing customer service surveys, and I guess I know why. But if I were ever asked by a Chinese bank how they could improve their service, my comment might be this: take money - don't give it away. You see, the red ink that China's banks have been swimming in for years, the reason they have been forced into massive restructuring schemes to look presentable for their IPOs, is because China's banks have been handing out non-performing loans for years (that's executive code for bad loans). The true extent of these bad loans is unknown, but clearing them off has been a painful undertaking. Many of these loans have gone to business people with little or no business experience and business plans likely scribbled out on a napkin in a hotpot restaurant. These aspiring business people are the ones who dream of selling snow shovels in Guangzhou. The money, and any hopes of collecting interest on it, vanishes almost as soon as these businesses open their doors. The bottom line is this: banks are supposed to make money. Making money begins with collecting interest on good risk loans or taking money from guys like me. End of story.

So I guess I shouldn't be surprised when, after being escorted into a shorter lineup by a bank manager, I'm promptly told that the bank can't take my money. I mistakenly thought having the name of the account holder and their account number would have done the trick for the deposit. After all, I've mastered this task at another branch of the same name. My landlord's account is in another city, but as long as I have his name and account number, 'mei wenti' as they say here in China. Well today, at this branch, it is a 'wenti'. Today, in addition to needing the name of the account holder, and the account number, the bank also needs the name of branch where the account is held, which is in another city. I have no idea what that name is, so I point again to the account number I wrote down and tell the bank manager to simply type it into the computer. Should he do that, I assure him all manner of information about that particular branch will come up on the screen. "Not possible," I'm told. It's the kind of problem I've encountered before: branches of the same banks that can't - or simply won't - communicate with each other. Lot's of 'I' - not so much 'T'.

Deja Vu, as I walk out of the bank, pockets bulging with money that isn't really mine. My attempt to give money to another person was doomed by powers I can barely comprehend. I'm steamed, but not surprised. I've been on this ride before.

The service issue, of course, isn't just a gripe from a few impatient foreigners. I've written on this topic before and have received overwhelming response from Chinese readers with similar stories. I assume that this group is representative of an endemic nationwide problem. I also assume that those little plastic signs with the red customer service indicator lights next to each bank teller aren't all broken after all.

I'm encouraged to hear how successful some of the reforms are going in China's banking sector. Lots of hoopla about oversubscribed public offerings, record setting IPOs, and some banks are earnestly trying to shore up what little customer service they have. I've seen some progress. I generally don't have to wait as long as I used to in order to be told that the bank won't take my money.

But after this latest encounter, I'm struck by the enormity of the challenges these institutions must be facing. Competition for clients, setting oneself apart from that competition, and taking money instead of giving it away means a profound change in business philosophy - so does improving customer service on the front lines. I know it will take a while yet. I understand. My bank adventures aren't a total loss. They have, after all, given me plenty of writing material. In the meantime, I will keep my distance from the banks as much as possible. But on the next occasion, when a bank visit is unavoidable, I hope the branch I end up in has Tom and Jerry cartoons.