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China's Banking Reform: The Remaining Agenda


  • Charles Kwong


Since 1994, China has endeavoured to establish a banking system that works more closely to commercial principles by transforming the specialized banks (SBs) into state-owned commercial banks (SOCBs). However, lending decisions of the SOCBs were still determined by state directives instead of profitability consideration. This paper argues that although the post-WTO banking reforms have accomplished staggering results, China's SOCBs need an overhaul of ownership structure if China aims to develop a full-fledged market-based banking system. It also argues that the current banking reforms are not comprehensive enough to sustain China's long-term economic development because there still remain noticeable capital constraints facing small- and medium-sized private enterprises, particularly those in rural areas.

Suggested Citation

  • Charles Kwong, 2011. "China's Banking Reform: The Remaining Agenda," Global Economic Review, Taylor & Francis Journals, vol. 40(2), pages 161-178.
  • Handle: RePEc:taf:glecrv:v:40:y:2011:i:2:p:161-178 DOI: 10.1080/1226508X.2011.585056

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    References listed on IDEAS

    1. Brehm Stefan, 2008. "Risk Management in China's State Banks - International Best Practice and the Political Economy of Regulation," Business and Politics, De Gruyter, vol. 10(1), pages 1-31, May.
    2. Chien-Hsun Chen & Hui-Tzu Shih, 2004. "Banking and Insurance in the New China," Books, Edward Elgar Publishing, number 3177.
    3. Kudrna, Zdenek, 2007. "Banking reform in China: Driven by international standards and Chinese specifics," MPRA Paper 7320, University Library of Munich, Germany.
    4. Shelagh Heffernan & Xiaoqing Fu, 2010. "Determinants of financial performance in Chinese banking," Applied Financial Economics, Taylor & Francis Journals, vol. 20(20), pages 1585-1600.
    5. Wai Chung Lo, 2001. "A Retrospect on China's Banking Reform," Chinese Economy, Taylor & Francis Journals, vol. 34(1), pages 15-28, January.
    6. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, July.
    7. Shujie Yao & Chunxia Jiang & Genfu Feng & Dirk Willenbockel, 2007. "WTO challenges and efficiency of Chinese banks," Applied Economics, Taylor & Francis Journals, vol. 39(5), pages 629-643.
    8. Lin, Xiaochi & Zhang, Yi, 2009. "Bank ownership reform and bank performance in China," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 20-29, January.
    9. Fred Gale, 2009. "Financial Reforms Push Capital to the Countryside," Chinese Economy, Taylor & Francis Journals, vol. 42(5), pages 58-78, September.
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