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Like China, the Chinese banking sector is in a class of its own

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  • Fungacova, Zuzana

    ()
    (BOFIT)

  • Korhonen, Iikka

    ()
    (BOFIT)

Abstract

This paper provides an overview of the Chinese banking sector, which has expanded tremendously over the past two decades. We first describe aggregate developments of the sector and compare them to the situation in other countries. Also, various financial institutions that operate in China are analyzed. Our results confirm that the Chinese banking sector is truly in a class of its own, especially given the level of China’s economic development. Despite significant reforms, the state and various public organizations still own controlling shares in the largest commercial banks. The state is also present on the borrowers’ side; it is estimated that about half of state-owned commercial bank lending still goes to state-controlled companies. In this way, the banking system can serve as an important policy tool. Another distinctive feature of the Chinese banking sector is the variety of its banking institutions. New types of banking institutions, especially those serving rural areas, are emerging all the time. While equity and debt markets are still tiny relative to the banking sector and their importance as sources of financing of investment remain minor, they have evolved rapidly in recent years.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 32/2011.

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Length: 32 pages
Date of creation: 13 Dec 2011
Date of revision:
Handle: RePEc:hhs:bofitp:2011_032

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Keywords: China; banking sector; state banks;

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References

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  1. Guonan Ma & Wang Yi, 2010. "China’s High Saving Rate: Myth and Reality," Economie Internationale, CEPII research center, issue 122, pages 5-40.
  2. William T. Allen & Han Shen, 2011. "Assessing China's Top-Down Securities Markets," NBER Working Papers 16713, National Bureau of Economic Research, Inc.
  3. Vernikov, Andrei, 2009. "Russian banking: The state makes a comeback?," BOFIT Discussion Papers 24/2009, Bank of Finland, Institute for Economies in Transition.
  4. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2004. "Bank performance, efficiency and ownership in transitition countries," BOFIT Discussion Papers 7/2004, Bank of Finland, Institute for Economies in Transition.
  5. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2009. "Bank ownership and efficiency in China: What will happen in the world's largest nation?," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 113-130, January.
  6. Richard Podpiera, 2006. "Progress in China'S Banking Sector Reform," IMF Working Papers 06/71, International Monetary Fund.
  7. Kumiko Okazaki & Masazumi Hattori & Wataru Takahashi, 2011. "The Challenges Confronting the Banking System Reform in China: An Analysis in Light of Japan's Experience of Financial Liberalization," IMES Discussion Paper Series 11-E-06, Institute for Monetary and Economic Studies, Bank of Japan.
  8. Pessarossi, Pierre & Weill, Laurent, 2013. "Choice of corporate debt in China: The role of state ownership," China Economic Review, Elsevier, vol. 26(C), pages 1-16.
  9. Chong, T.T.L. & Lu, L. & Ongena, S., 2011. "Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China (Replaced by CentER DP 2012-013)," Discussion Paper 2011-006, Tilburg University, Center for Economic Research.
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Cited by:
  1. Reuven Glick & Michael Hutchison, 2013. "China’s financial linkages with Asia and the global financial crisis," Working Paper Series 2013-12, Federal Reserve Bank of San Francisco.
  2. Lee, Jongchul, 2013. "Income Inequality In Urban China And The Role Of State Sector," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(2), pages 159-176, December.

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