Mainland China’s wholesale banking market is projected to grow at more than 10 percent per annum over the next five years. At that pace, it is set to overtake Japan’s as the largest in Asia by 2015. National development strategies, such as urbanization and industrialization, will continue to drive double-digit annual increases in the sector’s assets and revenues. This said, the landscape is changing, and both local banks and their foreign-owned counterparts face a more challenging competitive and regulatory environment. Loan growth is slowing, margins on corporate lending are under pressure, non-performing loans (NPLs) are on the rise, and new capital is needed to meet tougher capital-adequacy requirements.

In the future, all banks may therefore have to move a bit outside their comfort zone and target five attractive opportunities: a new age of infrastructure financing, untapped potential in relationship banking, better intermediation of capital flows, the neglected small-business sector, and the modernization of China’s capital markets.

Access to these opportunities is unequal, however, and will dictate different strategies. Local banks will need to move beyond their traditional corporate deposit and loan business into higher-margin products, grow their fee business, and control costs even more tightly. Foreign banks risk being marginalized if they do not find sustainable sources of new growth. While some will choose to remain focused on high-margin and cross-border businesses, others will go deeper into the local market. With the right strategy, both sorts of bank can find success in China’s burgeoning corporate and investment-banking (CIB) market.