1. Background of the four traditional state-owned banks
People’s Bank of China, which is the central bank of China, it used to be the sole bank that conduct all the banking activities in China, those activities such as collect revenue from all enterprises and allocate the funds through the budget. (Jiliang 2004) In 1978, China adopt its policies of reform and opening-up which introduced by Xiaoping Deng (1904-1997), the “designer” of reform and opening up policy and modernization. This policy stimulated the whole economy of China, and more importantly, the policy accelerates the development of Chinese bank system which is the cornerstone that China can become the world’s second largest economy.
In the early 1980, with the opening up of Chinese banking system, the four state-owned specialized banks established. These four specialized banks are the Industrial & Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC) and Agricultural Bank of China (ABC). The performance of 4 state owned bank was poor in the initial period due to the bad lending, these lending was to state-owned enterprises and many of these lending did not repay, as a result, the aggregate of non-performing loan (NPL) ratio in 4 state owned banks was above 30 per cent ( Huang 2006). In order to reduce the number of NPL and create a better investment environment, the Chinese Government decided to inject a US$33 billion to them and established the strong regulation and supervision. In recent decade, especially after global financial crisis during 2008, Chinese banks played a dominant role in the world banking system. It’s contributed to factors, for instance, firstly, the largest bank undergoes several restructure, secondly, the stable economic growth rate, the growth rate last year is 7.2% which is the slowest in last ten years, however it’s still the top one in the world, thirdly, the expansion of the Chinese economy ( Turner, Tan, Sadeghian).
Table 1

Source: The Banker, http:// www.thebanker.com/
The table 1 indicates the top 25 banks in the world 2013. The Chinese 4 major state owned banks all rank in top 10 banks in 2013. The most noticeable is the ICBC is the largest bank in the world in many categories, such as capital, asset and profitability. (Kim 2014). Xi Luo, the deputy governor of Industrial and Commercial of China, he stated that in last decade, the average growth rate of net profit of China 4 state-owned banks is 32%, which significantly higher than other countries bank sector, only 0.2% on average (Hexun 2013) Based on the table and the these data, it’s likely to observe that the future development of these 4 banks will be smoothly.
2. The challenges for four state-owned banks
However, due to the booming development of China banking sector, these four state owned banks will face many challenges from internal, such as the establishment of various banks, which has distinctive strategy to the state-own banks, for instance, Local Banks, “Private” Commercial Banks. And also, some financial institutions conduct banks’ function, for example, Insurance Company and Securities Company.
2.1 Local Banks
The local banks are wholly-own by the local government and local government fully used the investment fund to handle locally developed projects and programs (Martin 2012) currently, there is a trend that the four state-owned commercial banks fade out from county financial markets, the number of their branches shrank year by year. As a result, a huge gap between supply and demand existed, therefore it need some financial institutions to stationed which those institutions can truly satisfied county economic development and comprehend the new characteristics of county finance. Therefore, lots of local banks emerged in the county, it enriched the whole hierarchy of financial institutions and remits the financing pressure to SME (small medium enterprise). However, under the background of slow economic growth rate, the