It is easier to make money than sense out of China’s banks. These big four state-owned commercial banks are huge profit centres, but many who see vulnerabilities in China’s economy think that these banks are the problem when they actually reflect symptoms of distortions elsewhere. China’s banks are in fact too secure – and their performance could be improved by strengthening competition and breaking up the “too big to manage” entities.

Many critics cite inflexible interest rates which are deemed too low relative to inflation as the issue. Others point to excessive government interventions fomenting risks such as a property bubble. Still others remind us that the state-owned banking behemoths are sitting on a mountain of household deposits which feed into temptations to misuse captive funds given lax governance safeguards.

But China’s interest rates are already relatively high in real terms compared with other major economies in a global monetary system flooded with liquidity. Its capital markets lack the depth for interest rates to be shaped by market forces and the dominance of the big four banks reduces the benefits of having more flexible rates. The emergence of a property bubble has more to do with capital controls which discourage investors from moving their savings abroad and thus encourage speculation in the domestic property market. And these huge deposits are a natural consequence of the massive savings in an economy with limited investment options.