In China, Cash Carries the Weight

"We have been paying great attention to credit card risk and loan risk," Wang said.

As a result, Wang said, the country is trying to avoid allowing citizens to get their hands on credit too easily. He said restrictions on retail banking -- such as a $50,000 a year cap on how much a Chinese citizen can convert from yuan to foreign currencies and low credit limits on cards -- are meant to prevent these problems from spiraling out of control.

The slow development of consumer banking in China is rooted in the role banks historically played in the Communist state.

Until a few years ago, China's banks essentially were agents of government social policy, keeping state-owned enterprises afloat. Retail banking existed on a limited basis. Chinese citizens who wanted to invest had no choice but to put their money in state-owned banks because foreign banks were not allowed to operate in the country and because stock markets didn't exist.

Furthermore, the banks had little financial incentive to introduce fee-based retail banking. They were already markedly profitable from a large spread between lending and deposit rates, both controlled by the central government.

Now, retail banking is still a secondary reason for banks' existence. China's banks mostly supply credit to enterprises, said Arthur Kroeber, managing editor of the China Economic Quarterly in Beijing. He said the banks are not like those in the United States, which, he said, "provide credit to the creditworthy." They are "more like the idea of banks in Japan in the '70s or South Korea in the '80s and '90s."

"In a broad sense, the main purpose of the state-owned banks in China today is not profit maximization for shareholders," he said. "It's financing industrial development."

For instance, at the Industrial and Commercial Bank of China, one of the largest state-owned banks, bad loans represented 21 percent of its portfolio in 2005.

It wasn't uncommon for clerks at its remotest branches to use abacuses to make calculations. If a local branch was in trouble because of bad loans, the central government would send trucks with cash to bail it out and prevent a run on the bank.

But after a series of overhauls, the ICBC in October 2006 pulled off the biggest-ever initial public offering, raising $21.9 billion to make it the world's No. 5 bank by market value of its shares, just behind J.P. Morgan Chase. Its value climbed late in the year and it has since been the No. 2 or No. 3 bank in the world, depending on the closing price of various banks' shares. Only Citigroup of New York consistently outranks it now.

China's banks are so large that near-monthly announcements of embezzlement and bribery valued in the millions of dollars are mostly shrugged off by investors. For example, in 2005, shares in China Construction Bank, whose chairman resigned after allegations that he was taking bribes, soared during its initial public offering, which occurred after the scandal was announced.

"In any other country, this kind of scale of scandal would be a big event. But in China, the scandal cases did not really have a material impact on the operations of the banks," said May Yan, a bank analyst at Moody's Investors Service in Hong Kong.