I. Official Establishment of ICBC
After the Third Plenary Session of the 11th Central Committee of the Communist Party of China was held in December 1978, the financial system reform in China started to speed up. As various financial institutions were re-established and the demand for financial services was diversified, in order to address the contradiction of the People's Bank of China ("PBC") for both serving as the monetary policy maker & financial regulator and getting engaged in specific business operation, in September 1983, the State Council officially decided that the PBC would only play the role as the central bank and a new Industrial and Commercial Bank of China would be established to undertake the industrial and commercial credit and savings business previously handled by the PBC. After intensive preparation, on January 1, 1984, Industrial and Commercial Bank of China (ICBC) was officially incorporated, symbolizing the finial setup of the national specialized bank system in China.
i. Background of the establishment of ICBC
Before the reform and opening up, China mainly practiced the highly-centralized planned economic system. Correspondingly, the social investment and financing system was mainly supported by government finance with banks only playing a secondary role in a vertical way of capital distribution. Regarding the financial system, it was basically predominated by the PBC. As the Third Plenary Session of the 11th Central Committee of the CPC was held in December 1978, China rolled out the reform and opening up policy. As the reform and opening up was constantly deepened, China's economy and society rapidly developed and income of urban and rural residents was gradually increased, raising stronger demand for financial services. The situation was contradictory to the finance-supported and bank-supplemented investment and financing system predominated by one bank back then and it was in urgent need of reform. In October 1979, Deng Xiaoping, chief architect of China's reform and opening up initiative, proposed the famous assertion that "banks must play the real banking role", which drew open the curtain of China's financial system reform. In order to meet the diversified demand for financial services, in 1979, Agricultural Bank of China, Bank of China and People's Construction Bank of China were re-established one after another. Meanwhile, China International Trust and Investment Corporation was founded and urban and rural credit cooperatives flourished across China. However, a unified and orderly central bank system was not in place yet and China's financial sector became rudderless amid rampant competition. The PBC back then assumed the dual functions of central bank and specialized bank and after Agricultural Bank of China and Bank of China were re-established, it was still engaged in the two businesses of industrial and commercial credit and urban savings. There used to be a vivid metaphor that the PBC was both the referee and athlete and that it cannot maintain an objective perspective in financial regulation. Driven by their own interests and also due to lack of a complete set of self-discipline mechanisms, specialized banks all scrambled for market by competing to grant loans, causing credit extension to go out of control and affecting the adjustment and development and Chinese economy.
As the financial system reform was gradually deepened, on September 17, 1983, the State Council officially issued the Decision on the People's Bank of China to Exert the Dedicated Function of Central Bank and proposed that "the People's Bank of China shall be dedicated to exertion of the function as central bank and not assume the businesses of industrial and commercial credit and savings any more, so as to enhance the centralized management and comprehensive balance of credit capital and better serve the macro-economic decision-makings". Meanwhile, it decided to "set up Industrial and Commercial Bank of China to undertake the business of industrial and commercial credit and savings previously handled by the People's Bank of China".