The Strength Between Socbs And Jscbs In China

Published Date: 02 Nov 2017

Zhangyue ZHU 25167278

Contents

1. Introduction.................................................................................................2

2. Quantitative Methods Proposal..................................................................4

2.1. Hypothesis.............................................................................................4

2.2. Sampling Methods.................................................................................4

2.3. Data Collected Design...........................................................................5

2.4. Data Analysis.........................................................................................6

3. Qualitative Research Proposal..................................................................8

3.1. Ethnography..........................................................................................8

Critical evaluation.....................................................................................12

4.1. Benefits and Limitations.......................................................................12

4.2.Project Timeline.....................................................................................13

4.3. Risks and Ethics..................................................................................14

5. Reference................................................................................................16

1. Introduction

The paper is designed the title as ‘Comparing the strength between SOCBs (State-Owned Commercial Banks) and JSCBs (Joined-Stock Commercial Banks)’. On account of the all-round reform on financial system in China, SOCBs and JSCBs become the two main types in banking business. At the present time, the reform of the share-holding system of the SOCBs is carried out liking a bomb, and has a strong impact on JSCBs. Therefore, a more and more fierce competition is emerging in the banking market, but it is entirely a matter of preference about the two types of banks. Of which SOCBs occupy the most market share, simultaneously, it becomes the big motive force of development of national economy. However JSCBs seem to try to change the former situations, they pay particular attention to operational efficiency and profitability, and infuse new blood into banking. This paper attempts to analyse financial indicators, such as assets, equities, loans, deposits, non-performing loans ratio, and so on, administrative status, strengths and weaknesses of the two camps above to promote the strategies and recommendations. In addition, this paper can be based on the knowledge about econometrics, statistics both on quantitative and qualitative analysis, financial risk management, financial management, and financial accounting.

Respectively, for quantitative approach, the researcher will select the five banks of each two types of banks. Then, sampling frame should can be identified on the principle of different goals using equal sampling methods. When referring to sampling methods, the researcher can choose a method from simple random sample, systematic sample, stratified random sample, and cluster sampling. In this paper, there are five goals: marketing capacity and market share, non-performing loan, risk-return and profitability, efficiency in operation, and controlling the cost, thus the variables can be determined by each goals using the sampling methods. According to the limitation of collecting primary data, the secondary data are from annual financial reports and official statistics. Owing to the secondary data, the sample size has no choice but to the longest period of the existence written document. After collecting, editing and coding the original data, descriptive statistics, such as mean, VAR, line graph and pie chart, and regression are effectual approach to analyse the data. Via the results of analysis, the banks can polish up the approaches of management, improve the performance of management, increase the profits, push forward the development of the banks continually and steadily, and promote the growth of the financial market.

For the qualitative approach, ethnography is adequate method in this topic. First, the deep understanding of ethnography is essential to obtain the results of a high utility. The main sampling methods are gathering information, questionnaire, and interviewing. In order to save the time and money, proper softwares, such as professional website, are necessary. Editing and coding data are vital steps for primary data. There are six ways to analyse the data: categorization, abstraction, comparison, dimensionalization, iteration and refutation via tabulations, record and reproduce. Though analysis, the researcher can conclude the main means of different types banks when they face issues, and forecast the growth and crisis in the future, even give some advice and opinions of developing.

2. Quantitative Methods Proposal

2.1. Hypothesis

In this part, the proposal will be designed as taking a quantitative approach in a formal, objective, systematic process. Firstly, in China, most of the commercial banks are classified into two categories, one is SOCBs, the other is JSCBs. In this research, the researcher need to choose the same amount banks both in SOCBs and JSCBs. There are only five SOCBs: Bank Of China, Industrial and Commercial Bank of China Limited, Agricultural Bank of China, China Construction Bank, and Bank Of Communications, so they all need to be the representation. There are twelve JSCBs in China, so five banks banks need to be selected to be the sample. On the principle of the time of established, the five banks are China Merchants Bank (1987), China Citic Bank (1987), Shanghai Pudong Development Bank (1992), China Everbright Bank (1992), and Huaxia Bank (1992). Because the earlier established, the banks have more time to complete the development, so that the system of operation and management of the five JSCBs maintain stability whether or not there is any changes of surroundings, such as the policy of government. However, the limitation is the new and instability ones which could effect the result are not including, so the results of JSCBs could be more optimism rather than that of the truth. Thus, the research studies the long-term prospect. Secondly, the data are reliability and validity below. Thirdly, the approaches used below are hypothesized accuracy, in other words, the outcomes can be accepted as true.

2.2. Sampling Methods

In the narrow sense, there are four methods of sampling. First, ‘Simple random sampling is the most basic form of probability sampling and provides the theoretical basis for the more complicated forms. There are two ways of taking a simple random sample: with replacement, in which the same unit may be included more than once in the sample, and without replacement, in which all units in the sample are distinct.’ (Lohr, 1999) Second, ‘a systematic sample involves selecting every nth unit after a random start.’ (Ghauri and Gronhaug, 2005) Third, stratified random sample is applied to if the variables is divided into exclusive and exhaustive subset. Lastly, if the parent population is classified to only mutually exhaustive subset, cluster sampling is usually applied.

In the broad sense, choosing the sample size and types of data are also the sampling method. The larger the sample size, the lower the likely error in generalising to the population. The sample size is a compromise between the accuracy of findings and the amount of time and money invested in collecting, checking and analysing the data. For the data source, primary data is data collected for the purpose of the research, such as interviews, observations and surveys. Another type of data source is secondary data which is collected by other people or institution for some other purpose, such as daily newspapers, government statistics and demographic surveys.

2.3. Data Collected Design

Data collected design is separated into sampling frame, sample size, sampling technique, and selecting the sample.

To identify the sampling frame, the structure and objectives should be determined. For this topic, there are five targets to get in this research. Primarily, the values of total assets, equities, loans, and deposits of each bank are collected when studying the marketing capacity and market share. Then, the values of NPLs (non-performing loans), including the subset: substandard, doubtful, and loss, NPL ratio, values of provision, and provision coverage ratio, while the researcher analyses the non-performing loan. Next, if investigating the risk-return and profitability, the net interest incomes, incomes of intermediate businesses, operating incomes and profits, and net profits. Furthermore, the amount of branches and the number of employees are necessary for resolving the efficiency in operation. Lastly, the costs of operating make use of controlling the cost. The variables of each bank which is selected are composed of the sampling frame. Considering the accuracy, the sample size is decided ten years from 2003 to 2013. Though it is not very big enough, the data from authoritative government institution post only from 2003 which is limited the period. Obviously, it is impossible to collect the primary data from each single bank, in view of the privacy and large amount of the banks. In contrast, the secondary data, from annual reports of each bank and authoritative government institution which is named China Banking Regulatory Commission, are appropriate. Particularly, the data of 2013 do not exist at present, but if the data have been arranged before analysed, they would be added. Moreover, the collectors are professional, so that the data should be consistent and accurate.

2.4. Data Analysis

Data analysis is the core part in the investigation. Firstly, editing the collected data is to secure a quality standard, involving inspection and correction of observation forms. Then, coding the data is to classify the data based on variables above. After preparing the data, they can start to be analysed using SPSS or Excel.

First of all, the descriptive statistics is suitable for analysing the data, such as mean, VAR, line graph, pie chart, and regression. The formula of mean is , and the formula of VAR is . To aim at the analysis of marketing capacity and market share, the values of total asset, equity, loan and deposit should be calculated by the mean, VAR and line graph from 2003 to 2013. According to the outcomes of mean, the researcher can compare the differences to investigate which type of banks is better in the scope of its asset, equity, loan or deposit. According to the results of VAR, the researcher can know the stability of which studied. Meanwhile, line graph illustrates the trend which indicates the changes coming from both innovation itself and policy of government, and can be calculated the differences between the 2003 and 2013 to study the speed of growth. In summary, the bigger mean means that the type of banks is in the ascendant of quantity, and the bigger difference between 2004 and 2013 means that the type of banks is in the ascendant of developing. To study non-performing loans, the differences of mean of variables (values and ratios of NPLs and provision) between 2003 and 2013 can also demonstrate the growth and VAR shows the stability. The approaches (mean, VAR and line graph) are applied to all the variables below, so the details are given unnecessary. In this section, the values of substandard, doubtful and loss can draw the pie chart to study the changes of the proportion of each subset. Moreover, the following regressions are the way to work out the relationships among the NPLs of all commercial banks, NPLs of SOCBs, and NPLs of JSCBs, and among the provision of all commercial banks, provision of SOCBs, and provision of JSCBs.

Using SPSS, the computer could simulate the ß, and its standard error, standardized coefficients, t-test, and significant. If the number of significant is larger than 0.05, the independent variable has no relation to the dependent variable. Furthermore, regression coefficient, such as R, R2, adjusted R2, and standard error of the estimation, can be calculated. At the same time, the number of R square is represented the variability in the sample, and the number of adjusted R square is on behalf of the variability in the population.

Apart from that, before descriptive statistics, financial analysis in the rest section is also appropriate to explain the potential meaning of the indicators. Take profitability as an example. When studying the profitability of banks, a significant indicator is ROCE, so ROCE should be calculated by the data collected using the formula below.

Though analysis, the strengths and trend of growth of the two types of banks are distinct to know. In sum up, the researcher can forecast the status of developing easily.

3. Qualitative Research Proposal

3.1. Ethnography

The typical interpretive qualitative research method is ethnography, of which ‘ethno’ means ‘a nation’, ‘people’, or ‘a cultural group’, and ‘graphy’ means ‘drawing’ or ‘portray’. Hence, ethnography means ‘human’s drafting’ which draws the direction or life from the same human nature. In other words, ‘ethnographic management research usually has a focus upon the manner in which people interact and collaborate in observable and regular ways-usually in organizational settings.’ (Gill and Johnson, 2011) However, ethnography is not only a kind of product, but also a process. With reference to products, it is the outgrowth of research as a literature, and in terms of process, it is the interactive relationship after observing for a long term in a group to study the spreings of conduct and culture sharing community via surveying people’s activities or interviewing the members of community one by one.

In practice, ethnographic research have to follow several key interrelated issues. ‘These issues refer to what to study, where and when to study it, who to investigate, and how to undertake the research.’ (Gill and Johnson, 2011) In this case, the research demonstrates the differences of strength between SOCBs and JSCBs. The subject of the research is as a spectator, and the object of the research is as a participant who is each bank selected above from SOCBs and JSCBs. The spectator would undertake via gathering the information, questionnaire, and interviewing, which are sampling method.

Specifically, these sampling methods are put into practice as follow. First, the main information is written document, such as newspapers, journals, books, policy statements, reports and official documents. Each indicator, which is found in the annual report used in the quantitative method, has the standard range and the range is usually from the written document. Whether the range is required strictly or is just the recommendation, it can compare with the mean of the indicator, which is calculated by the former approach, to test whether the indicator is suitable for the bank. Take Basel Accord as an example. Basel Accord is the international standard for capital adequacy ratio. Basel Accord was set down in 1975, and it was modified in 1999. Then, the modified accord was carried into practice in 2006, and the accord was evoluted in 2010. Thus, the mean of related indicator would be changed. If the related indicator changes each time the accord is adjusted, the bank is following the standard strictly, but if not, the research could try to find the reasons. In addition, the information is not eliminate the media accounts such as radio and TV. Second, questionnaire is the common method to study the impacts on staffs’ operating. The questions on the questionnaire are designed as follow.

Questionnaire for managers

Which the type of banks are you in?

A. State-Owing Commercial Bank B. Joint-Stock Commercial Bank

2. Which branch are you in?

A. Head Office B. Branch C. Subbranch D. Branch aboard

3. What position are you in? __________________________________

4. What are you usually guided by when you operate?

A. Follow the standard for the indicator

B. Follow the guide from the upper level managers

C. Follow the guidebook of the bank

D. Follow the policy statement from the government

5. How often are you trained?

A. A month B. Three months C. Half a year D. A year E. Others:___________

6. Which content are referred to when you are trained?

A. The ability of management B. The technique of the specific position

C. Theory of banking, management, economics D. Professional qualification

E. Improvement of skills F. Others:_________________________________

7. If you find there are some problems of the bank, such as economics crisis and dangerous indicator, what would you do?

A. Follow the guide and standard to adjust the operation as quickly as possible

B. Inform the upper level managers and wait their instruction

C. Wait until the upper level managers find that and give the instruction

D. Others:______________________________________________________

8. If you find the instrument is not suitable for the branch, what would you do?

A. Still follow B. Do what you think right C. Ask the colleague

D. Ask the upper managers E. Others:______________________________

9. How long do you think the measures should be put into practice, once the crisis or dangerous indicator happens?

A. Three days B. A week C. A month D. 1-3 months E. 3-6 months F: Others:__

10. How long do you think the measures can be tested whether they are suitable for the bank?

A. A week B. Two weeks C. A month D. Three months E. Others:_______

The Questionnaire sample

The method ‘is useful for a large volume of unstructured, in-depth data. The approach is time consuming and costly, and requires verbatim transcripts to be available.’ (Easterby-Smith, Thorpe and Lowe, 1991) In this case, the method of questionnaire needs to focus on the cost, but the research need to consider time when interviewing. Hence, the questionnaire is made and sent online, such as the website: survey network and opinion surveys. Third, there are some points to consider when the research interviews the managers in the head office of each bank. They are the degree of structure, interviewing skills, social interaction, obtaining trust, interview bias, and relevance to interviewees, so the above factors shall be taken into consideration. In this case, the interviewing is designed as telephone interviewing for about 15 minutes. The questions are about how to adjust the operation and guide the branch.

When collecting data, the researcher should write down everything found, and after all data source collected, the data should be prepared, and then be analysed. First, ‘data reduction refers to the process of selecting, focusing, simplifying, abstracting and transforming the data that appear in writing up field notes or transcriptions.’ (Ghauri and Gronhaug, 2005), and then, the data can be compressed to summarise and take action. To be specific, the systematically approaches to analyse the qualitative data are ‘categorization, abstraction, comparison, dimensionalization, iteration and refutation’. (Ghauri and Gronhaug, 2005) Tabulations, record and reproduce are the tools to facilitate the analysis and preserve all the in-depth ideas. After analysis, the researcher can interpret the topic, making sense of these data, in the matter of concepts, translation, forming coherent patterns, and comparing with the common sense and experiences.

4. Critical evaluation

4.1. Benefits and Limitations

On the basis of research onion, the six steps adopt to construe critical evaluation. They are techniques and procedures, time horizons, choices, strategies, approaches, and philosophies. First, in terms of techniques and procedures, it is significant to analyse the merits and demerits of data source. Secondary data are applied to the quantitative approach. By merits, secondary data are easy to access saving the time and money but high quality and reliable. By demerits, the biggest problem is different objectives when collected for another study, so that the data may be not suitable for this one. Furthermore, most of secondary data in this topic refer to official statistics, but the government or banks may change the way of figures. Primary data are applied to the qualitative approach, such as interviewing and questionnaire. By merits, the data are collected for the particular project at hand, so that the data which access difficultly and directly are almost suitable for this topic. By demerits, primary data would take too much time and cost a lot to collect, and many participants are not willing to coordinate with the researcher, so that little amount of high quality samples would get and be hard to analyse at last. Second, in terms of time horizons, longitudinal data are good for comparing different status of the data. For example, in this case, longitudinal data are the value of NPLs of the Bank of China from 2003 to 2013, therefore, the researcher is easy to adjust them via simple statistics. Though longitudinal data are flexibility, they are hard to keep standardization and unification. For example, the values of same meaning may be sorted out different categories in different banks. Relatively, cross-sectional data in this case are values of different banks in a same time. The data are easy to compare the situation of different banks in a same time, but the data are hard to find in a longer period if the research need study more accurately. Besides, the demerits of cross-sectional data are the same as the demerits of secondary data. Third, in reference of choices, this investigation puts mixed method and multi-method to use. Generally, this choices are ‘the in-depth, contextualized, and natural but more time-consuming insights of qualitative research coupled with the more-efficient but less rich or compelling predictive power of quantitative research.’ (Dedoose, 2012) Forth, there are two strategies: ethnography and case study. For ethnography, ‘one of the more widely cited benefits of conducting ethnographic research is that due to the first-hand observation that is involved, usually conducted over an extended period of time, the research can provide extensive and in-depth findings about human behaviour.’ (Mowatt, 2013) Meanwhile, the limitation of ethnography is to take a longer period to observe to get a reliable result, and the observations are usually not willing to do the research. Even though the participants are willing to attend the questionnaire and interviewing, the conclusions ‘could be altered by the observers’ cultural bias or ignorance’ (Mowatt, 2013) Fifth, the advantages of inductive approach can reflect the common character and researcher is actively involved, attentive, motivated, but the research would be imperfect induction due to the limitation of the experiences and knowledge of researcher. Sixth, through the paper, the researcher attempts to apply the objectivism and pragmatism, which is based on the real evidences, such as figures, to solve the problems about how to develop banking. Interpretivism and positivism are both used in this paper when doing the approach. To sum up, this paper is found on scientific, systematic and precision process, though there are some details which need to be improved.

4.2. Project Timeline

It is essential to create a timeline for the major steps for the purpose of clarify that the investigation is well thought-out, meanwhile a timeline setted out makes the whole process more manageable.

Project timeline in the Gantt chart by‘Microsoft Project’

4.3. Risks and Ethics

Through research, the researcher would face some threats which can be separated into three parts, research profession, participants, and public. In connection with research profession, the researcher would make sure the investigation to be quality and integrity, avoiding fabrication, falsification or misrepresentation of evidence, data and findings. If intending to minimise the the threats, the researcher should seek the literatures carefully and understand it deeply via searching assistant materials and asking the supervisor to ensure reporting conceptions, procedures, results accurately. Then, to participants, the researcher should pay enough respect to participants and avoid harm to them. Similarly, the researcher should conform the confidentiality and anonymity of the participants, and let the participants know that the contents of interviews will be used into the research. Lastly, the researcher should pay responsibility to the public. If citing the literature, the researcher should write all relevant biographies with formal format in the reference. Lastly, the right spelling and grammar help readers understand the essay, and help researcher express their meaning precisely.