Editor's note: Matteo Giovannini is a finance professional at the Industrial and Commercial Bank of China in Beijing and a member of the China Task Force at the Italian Ministry of Economic Development. The article reflects the author's views, and not necessarily those of CGTN.

The Chinese banking system has been for long time characterized by a very static and unchanged apparatus with the presence of the People's Bank of China, the country's central bank, at its core and in charge of conducting financial operations within the mainland.

The economic reforms rolled out from 1978 have totally changed the structure of the Chinese banking sector with a transformation from a mono-bank model to a multi-financial institutions system where five specialized state-owned banks, Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), the Bank of China (BoC), Bank of Communications (BoCom) and the Agricultural Bank of China (ABC) were authorized to accept deposits and perform banking business.

The 21sh century is now marked by a greater role of China in global finance with its four main banks crowned as the world's largest in terms of assets and by a domestic banking sector that has evolved to become a more sophisticated provider of resource allocation and risk diversification.

According to a recent news released by Caixin Media Group the China Securities Regulatory Commission (CSRC), the top securities watchdog, is now considering to issue securities licenses to a selected batch of domestic commercial banks in an attempt to create "aircraft carrier-level" investment banks that could have both the size and the scale to compete at the same level with major global banks at a time of rapid opening-up of the Chinese financial market to the inward investments of foreign entities.

The announcement represents an opportunity for domestic commercial banks to further develop and grow their business by widening their business perimeter thanks to the coverage of new segments while providing lower costs together with better product and quality service to their large customer base.

Commercial banks should consider the classic make-or-buy dilemma taught in every business school by taking into account the option of either setting up their own securities entities or buying a company on the market.

Probably the faster way to benefit from the proposed change in the regulation would be to activate operations of mergers and acquisitions (M&A) targeting consolidated securities firms that could immediately guarantee a confident level of expertise and numerous contacts in the brokerage segment, avoiding dangerous waste of time and lowering the risk that comes from setting up from scratch a new division or subsidiary.

An expansion of the business scope can be a game changer for domestic lenders because it could immediately offer the chance to provide services spanning from investment banking to underwriting initial public offering, retail brokering and proprietary trading, turning some of its prominent lenders into national champions able to compete with global rivals.

In this sense, at the core of this decision is the plan of turning some major Chinese commercial banks into universal banks by combining the three main services of banking (wholesale banking, retail banking, and investment banking) under the same roof.

By becoming financial services conglomerates through the synergy between retail, wholesale and investment banking services, banks such as ICBC could benefit from the economies of scale in IT systems due to the consolidation and in an easier access to capitals at the service of corporations and individual clients all over the world.

The release of licenses could also be seen as a strategy to counterbalance the imminent entrance or increase of weight of big foreign competitors that already offer a full spectrum of services. 

Banks such as JP Morgan, Bank of America and Citigroup are already the largest universal banks in the U.S. and their presence in the Chinese financial market could be an incentive for domestic lenders to acquire know-how and to measure their own future global aspiration while within a familiar environment.

Once Chinese banks have completed the acquisition of the necessary expertise in all different domains of the banking spectrum, they will be ready to expand their universal banking offer even outside the Chinese border to become real global players while increasing their global market share.

China's economy has grown dramatically in the last four decades and reforms have helped to rationalize the structure of its financial institutions by modernizing the type of governance, by increasing the level of expertise and by extending the global reach.

The authorities' intention to create future universal banks through the issuance of licenses to operate investment banking services represents a strategic move to further project Chinese aspirations to build soon a banking system which is able to challenge the leading position in an industry where the United States has dominated for long time.

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