As I was writing this column in the afternoon of Monday, March 19, I was interrupted by two telephone calls. Both had something to do with the financial services we have here in China. The first was from folks at home: “We're going to delay our mortgage payment this month.”

“Why?”

“Not our fault. The Bank of China had a city-wide breakdown for heaven-knows what bug in their system.”

“Really!” I exclaimed, trying to figure out if the accident would affect all international corporations operating in Beijing and whether any accounts could get lost in the process.

The second call was from a friend asking where his son, who has just graduated, could find loans for some of his innovative ideas. When I said I had no idea except for venture capital investors, he said: “My son's are not the kind of big, high-tech ideas. Just some small loans will do to help him start.”

“Then that's perhaps a question no one can answer at the moment,” I said in dismay.

These illustrate where the Chinese banking industry stands — wanting desperately the technologies to connect with the global business, and being wanted desperately to develop enough financial products for a rapidly developing nation.

To innovate — both its own system and its services — is what the Chinese banking industry will have to do to survive the post-WTO era.

With WTO permission, China had a five-year preparatory period before it had to allow international banks' full-scale operation in the country. Now is the beginning of the sixth year. So Chinese bank customers have a good reason to expect more of what they want from the increasingly competitive market.

Right now, except for the Agricultural Bank of China, all former State-owned major banks have been listed on stock markets — on the mainland and overseas. But IPOs are easy, especially when international investors are waiting in line to buy their way into a large market of financial services. Nor will it be difficult for the banks to turn out impressive figures in the financial reports right after the IPOs.

Yet these are hard to sustain. After all, what investors expect from the Chinese banks' shares is not their size, their local advantage, or their government relations, but their business performance. The greatest challenge to the Chinese banking industry is that, at the moment, people can only guess which bank has the greatest likelihood to be a winner in the marketplace, while none of them can be expected to be able to go through the needed changes without major shake-ups, and major personnel reshuffles.

Part of the challenge also lies in the fact that in banking business, it's usually difficult for large banks to grow by cutting costs. In order to stay large and to provide all-around services, they have to continuously spend on information technology and on managers who can lead their new schemes.

On the part of industry regulators, welcoming innovation is, of course, a good sign. Indeed, that is the best welcome possible for the international banks as well the Chinese banks that are ready to make a difference.

But what about the few largest banks? How can they learn to compete? Or, how can they learn to generate investor value through competition? Can they translate their ambitions into changes in their everyday business? People have no clue yet.

Indeed, investors cannot be confident in the changes they want unless they see widespread training and retraining programs for Chinese banking employees. And until that happens, the waiting game will continue for both investors and customers.

By You Nuo