Where Is The Chinese Banking System Going With The Ongoing Reform?
AbstractThe Chinese banking system, characterized by a large proportion of state-ownership and low capitalization, has started a reform process based on three main pillars: (i) bank restructuring, with the cleaning- up of non-performing loans and public capital injections, particularly in the four largest state-owned banks; (ii) financial liberalization, with the gradual flexibilizaton of price and quantity controls and the opening-up to foreign competition; and (iii) strengthened financial regulation and supervision, as well as better risk management, corporate governance, disclosure, and the introduction of international standards. Although it is still early to judge on the success of the reform, the available evidence does not offer a very optimistic outlook. The solvency of Chinese banks is still very weak, with a stubbornly high level of non-performing loans, and profitability is poor. Given the commitment of the Chinese authorities to fully open up its banking system to foreign competition by 2006, it seems crucial that financial reform accelerates so that the Chinese banking system can compete at the international level. This is particularly the case for the reduction of NPLs and bank recapitalization as well as for a furthered improvement of bank regulation and supervision.
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Length: 42 pages
Date of creation: 05 Aug 2004
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Chinese financial system; financial reform; bank restructuring; financial liberalization; bank regulation and supervision;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
- G2 - Financial Economics - - Financial Institutions and Services
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-09 (All new papers)
- NEP-HIS-2004-08-09 (Business, Economic & Financial History)
- NEP-SEA-2004-08-09 (South East Asia)
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