Any six-year-old worth his salt knows exactly what happens when you dig straight down in a sandbox. Go far enough, and you’ll reach China. Geographical inaccuracies aside, the implication is clear: China is our polar opposite. And this line of reasoning carries weight even for grown-ups. Still, in some strange ways, America and China share many things in common. We are both multiethnic empires with coastal capital cities considered out of touch with the mainstream. We both still practice capital punishment, unlike most other industrialized nations. And now, both of our governments are at odds with the banking industry’s avarice.
The Wall Street Journal reports that the China Banking Regulatory Commission has launched a probe into excessive banking fees this month. The Commission, which is sort of like the SEC and the OCC and the CFPB rolled into one, has threatened banks with “severe” punishment for levying exorbitant fees, according to the WSJ.
“In recent months,” writes the Journal, “customers have increasingly complained about banking fees, including for matters as minor as changing an Internet password.”
As to whether young Chinese have started donning Guy Fawkes masks, the Journal does not say. Though there are few credit unions for Chinese to move to — banking, for the most part, is a state-run industry. In fact, according to this paper by Xuejin Zuo of the Shanghai Academy of Social Sciences, credit unions have been a source of financial instability in China, which is quite different from the case here in the States.
China’s banking industry has gotten fat off of these fees, though, the Journal notes. Net income from fees and commissions has grown from under 40 billion Yuan in 2007 to nearly 100 billion Yuan (about $159 million) last year.
But the similarities don’t end there. Other gripes Chinese folks have about their banks include: the low interest-rate caps imposed by Beijing, and banks’ unwillingness to lend to small businesses. Much like here in the U.S., Beijing’s central bank determines the prevailing interest rates. As for the small-business lending, China’s big four banks are tasked with supporting state-operated enterprises (SOEs), which can siphon off capital from other, potentially more profitable, small businesses.
It’s almost as if, by combining unfettered capitalism with a government that only seeks to further big businesses’ interests, it leads to bad outcomes for consumers and citizens alike! Almost!
The key difference is how bankers are responding to Beijing’s saber-rattling. According to the Journal, they’re willing to cooperate — very willing. Compare that to Bank of America® CEO Brian Moynihan, who nearly got into a verbal tiff with President Obama over the president’s suggestion that his federally-bailed-out bank was being a bit greedy with its customer base by imposing a $5 monthly fee on debit card use, last November.
Perhaps it was Beijing’s threat of “severe” punishment that whipped Chinese bankers into shape. While both the U.S. and China put their own citizens to death — one of our cherished similarities! — China does so for a number of less grave crimes than we do here, among them: stealing guns, arson and food-safety violations.
A truly oppressive state can coerce businessmen to bend to its will quite easily. We should be thankful that ours is not oppressive in this way, and be sure to point this out to any banker casually comparing Obama to Stalin for making a relatively toothless bureaucracy with a slick website. It could be a lot worse — or…better?