The Man Who Ran China’s Biggest Bank Looks West

Jiang Jianqing, who retired as chairman of ICBC in May, cites lessons for China from global financial stresses.
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Photographer: Adam Dean/Bloomberg Markets

Jiang Jianqing considers himself a connoisseur, not of fine French wines, as you might expect from a banker of his stature, but rather of financial crises.

During a career in Chinese banking that’s spanned four decades—including time as the head of Industrial & Commercial Bank of China, the world’s biggest lender by assets—Jiang has studied meltdowns through the ages. He’s written books and articles on banking history and the not-so-infrequent financial crises the world has witnessed over the past few centuries. “Younger generations will forget the reasons,” he says in a recent interview, pointing to three enduring themes behind the calamities: economic imbalances, shoddy regulation, and greed.

Will China—home to bad-debt-burdened banks, heavily indebted companies, and an overheated housing industry—be the scene of the world’s next financial train wreck? The debate is one of the biggest in global finance. To bearish investment banks and contrarian investors, China is sliding toward either a crisis or stagnation as ever-greater amounts of credit deliver ever-diminishing economic returns.

Jiang Jianqing

Jiang Jianqing

Photographer: Adam Dean/Bloomberg Markets

Jiang, 63, dismisses this sort of analysis from Western financiers and economists as alarmist. Relaxed and contemplative, having retired as chairman of ICBC in May, he says he doesn’t see any signs of a meltdown. And he rejects claims that banks such as ICBC, And he rejects claims that banks such as ICBC, one of China's big four state lenders, are hiding mountains of undeclared bad loans, are hiding mountains of undeclared bad loans. Wild predictions to the contrary, he says, betray a lack of understanding of how China works and how far the Chinese financial system has come. “As Chairman Mao once said, ‘If you want to know the taste of the pear, you must taste the pear,’ ” says Jiang, who worked as a farmhand and miner during the Cultural Revolution, long before he joined the banking elites. “Some people write a lot of reports or articles about how a pear tastes by using only their imagination.”

The financial industry is rolling out one warning after another. A Deutsche Bank report in September cautioned clients about a potential housing bubble in Shanghai, Shenzhen, and other major Chinese cities. In October, Goldman Sachs called on the government of Xi Jinping to urgently weed out “zombie” state-owned enterprises. Hedge fund manager Kyle Bass estimates Chinese banks face $3.5 trillion of losses as an unprecedented rise in credit that started in late 2008 reaches a breaking point. “This number is relevant due to the fact that it is significantly more than the entire equity capital in the Chinese banking system,” Bass said in an e-mail. Similarly, billionaire George Soros warns of a hard landing, while another investor, Jim Chanos, sees China retracing the mistakes Japan made in its bubbly late 1980s. In October the International Monetary Fund said the window was “closing quickly” on China’s ability to contain the risks from an explosion in corporate debt, which has reached 165 percent of gross domestic product.

Jiang’s different perspective is born of a 37-year career that mirrors the rapid rise of China’s $11 trillion economy as well as the stop-start modernization of its financial system. When he became president of ICBC in 2000, he inherited a bank that was mired in bad debt, in need of a government bailout, and bereft of risk-management controls.

He turned things around. ICBC’s official bad-loan ratio is lower than 2 percent, compared with 34 percent when he started working at the bank’s Beijing headquarters in 1999. (Judged by more modern reporting standards, he says, the ratio then would have been 47.5 percent.) He counts improvements in risk controls among his proudest achievements. According to Jiang, ICBC now classifies loans in 12 categories based on repayment risks, using a methodology that’s stricter than the five-category system required by the China Banking Regulatory Commission.

Jiang ran ICBC during the biggest expansion of credit in history. The asset value of Chinese banks jumped 276 percent in eight years, to 218 trillion yuan ($33 trillion) as of June. That’s more than double the amount held collectively by U.S. commercial banks. ICBC had a market capitalization of $228 billion in early November.

After overseeing the bank for 16 years, Jiang left to head an ICBC-led fund that plans to raise as much as €10 billion ($11.1 billion) to invest in central and Eastern Europe. The venture is part of China’s One Belt, One Road program to promote trade and economic development along ancient Silk Road maritime and land routes. It will focus on investment in infrastructure, high-tech manufacturing, and consumer goods, according to statements from ICBC and the Chinese government.

Heading the investment fund is a natural fit for Jiang, says Keith Pogson, a Hong Kong-based managing partner at Ernst & Young who worked with Jiang as ICBC’s auditor from 2001 to 2012. “ICBC has been at the forefront of financing the infrastructure build-out both inside China and, increasingly, with Chinese projects or businesses outside China,” he says. “That experience would be invaluable in doing similar things in Eastern Europe. Remember, that is really where One Belt, One Road ends up.”

Although Jiang climbed to the pinnacle of Chinese banking, his salary last year was all of $81,000, or 0.3 percent of the $27 million earned by JPMorgan Chase Chief Executive Officer Jamie Dimon. Given his minister-level status in Chinese officialdom, Jiang probably enjoyed certain perks, such as a car and driver, but ICBC doesn’t disclose them.


Shang shan xia xiang! “Up to the mountains, down to the villages” was a rallying cry of Mao’s Cultural Revolution. It recalls a tumultuous time beginning in the ’60s when millions of urban youth such as Jiang were sent to the countryside to be re-educated by the peasants. He remembers tearful scenes among families at the railway station when he left his native Shanghai in 1970—a 17-year-old embarking on a four-day trip by train, bus, and foot to a remote part of Jiangxi province.

While someone his age elsewhere in the world might have been studying at a university, Jiang was working—first as a farm laborer and then as the lone teacher in a school, instructing kids in everything from mathematics to music. Later he was a coal miner in Henan province. For him, re-education worked. “The experience made me better understand grass-roots Chinese society,” he says.

Jiang’s first banking job came in 1979. He was an accountant in Shanghai at the corporate banking counter of a three-counter branch of the People’s Bank of China, he says. As a banker in a government-dominated system, Jiang would have learned to balance “political and business interests,” says He Xuanlai, a Singapore-based analyst at Commerzbank.

By 1993, 15 years into the opening up of China under Deng Xiaoping, Jiang had become deputy head of ICBC’s Shanghai branch. Within a couple of years he was running what’s now the Bank of Shanghai. In 1997 he rejoined ICBC as its Shanghai head. Two years later—as Premier Zhu Rongji was restructuring some of the nation’s giant state-owned enterprises, triggering mass layoffs—Jiang was named a vice president for ICBC.

Tackling a vast heap of nonperforming credit and establishing effective risk controls proved to be “a tremendous challenge and pressure,” he says. But according to Fred Hu, a former Greater China chairman of Goldman Sachs who worked with him, one of Jiang’s biggest achievements was the politically sensitive task of cutting a bloated workforce that included some poorly educated staff and ex-military personnel who lacked the skills needed at a modern bank. At its peak in 1995, ICBC had about 570,000 staffers, according to the bank. Now, 21 years later, with a vastly expanded loan book, it has 459,000 employees.

Making the cuts, as well as modernizing the bank by investing heavily in technology, was no easy task for Jiang. “He had the guts to withstand any political pressure, to do whatever he thought was necessary to put ICBC on the right footing,” says Hu, the founder of private equity fund Primavera Capital Group and nonexecutive chairman of fast-food business Yum China. What’s more, Hu says, Jiang maintained a passion for his job even while he was “getting paid like a junior analyst of an investment bank.”

This story appears in the December 2016 / January 2017 issue of Bloomberg Markets.

This story appears in the December 2016 / January 2017 issue of Bloomberg Markets.

Cover artwork: Roberto Parada

Jiang would prove unusual among his peers at the big Chinese state banks for staying in his role for so long rather than jumping to another party appointment, such as running a financial regulatory agency or a province. During his time at ICBC, he made his mark as an effective salesman—first by persuading Goldman Sachs to buy a 5.8 percent stake in the bank, then by taking it public in 2006, raising $22 billion, a world record at the time. “He’s clearly one of the fathers of modern-day Chinese banking,” Ernst & Young’s Pogson says.

Although Jiang considers China’s bad-debt workout during the 1990s more challenging than anything his country faces today, he sees thorny challenges ahead. The Chinese economy has decelerated from double-digit growth rates, slowing every year since 2010, and lenders need to cut off credit to the “zombie” companies as part of what will be a protracted deleveraging for the country. Over the past two to three years, Jiang says, economic restructuring has put pressure on nonperforming loans. He says controlling the level of bad debt is “testimony that the risk-control systems we put in place have worked well.”

China has more work to do to get its financial sector on a firmer footing. Jiang says companies need to be encouraged to tap capital markets for financing instead of relying on bank loans, while wealth management products—worth $3.9 trillion—need better regulation and more transparency, with investors carrying the risks.

Ever the historian, Jiang takes the long view of the evolution of Chinese banking. “The Western banks have more than several hundred years of history,” he says. “The modern banking system started late in China.” Looking ahead, he casts a wary eye on China’s growing web of shadow lending, with banks channeling money through intermediary structures to bypass capital and loan-loss provision requirements.

Jiang doesn’t gloat about the comeuppance some non-Chinese banks endured during the global financial crisis. “The lesson we have learned from Western banks during the global financial crisis is that if China enters the water of financial reform and innovation,” he says with a smile, “we ought to enter at the place that is most shallow.”

As Jiang embarks on a new chapter in his career, the water will have to get deeper without him. —Additional reporting by Jun Luo and Heng Xie, with Cathy Chan and Paul Panckhurst

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