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China's Financial Sector Reforms

Author

Listed:
  • Richard Herd

    (OECD)

  • Samuel Hill

    (OECD)

  • Charles Pigott

Abstract

Reforms to modernise and strengthen the financial sector have continued in recent years. The cleaning-up of the stock of non-performing loans is largely completed and considerable progress has been made in improving commercial banks’ corporate governance structures and risk management systems. These reforms have given rise to stronger Chinese banks which have so far weathered the global slowdown well. Reform of capital markets has focused on phasing out trading prohibitions on non-traded shares and modernising securities market institutions. Efforts have also been made to improve credit access to underserved segments, notably small and medium-sized enterprises and rural China. Despite progress in opening up the financial sector to international investors and in allowing domestic investors to invest abroad, liberalisation has been slow and in most market segments the foreign share remains very small. Ownership of financial institutions remains dominated by the State, raising issues concerning the financial system’s ability to serve the private sector as well as the extent to which banks lending decisions are based purely on commercial considerations. Although the bond market has continued to grow, corporate bond issuance remains relatively small and this segment will need to be further developed in order to address the over-reliance on the banking system Les réformes financières en Chine Les réformes visant à moderniser et à renforcer le secteur financier ont continué dans les années récentes. L’assainissement des bilans a beaucoup avancé et on a assisté à une nette amélioration des systèmes de gouvernance et de gestion des risques dans les banques commerciales. Ces changements ont abouti à une consolidation des banques chinoises, qui jusqu’ici ont bien résisté au ralentissement mondial. La réforme des marchés de capitaux a privilégié la suppression progressive des restrictions concernant les actions non négociables et la modernisation des institutions opérant sur les marchés de titres. On a aussi pris des mesures pour faciliter l’accès au crédit des secteurs mal desservis, notamment les PME et le milieu rural. Malgré l’ouverture progressive du secteur financier aux investisseurs internationaux et l’autorisation postérieure donnée aux investisseurs nationaux d’opérer à l’étranger, la libéralisation a été lente et la part étrangère reste très réduite dans la plupart des compartiments du marché. L’État demeure le principal propriétaire des institutions financières, ce qui amène à s’interroger sur leur capacité à servir le secteur privé et sur le degré auquel les décisions de prêt des banques sont guidées par des considérations commerciales. Bien que le marché obligataire continue à se développer, l’émission de titres de sociétés est encore relativement limitée et devra s’accroître pour réduire le recours excessif au système bancaire.

Suggested Citation

  • Richard Herd & Samuel Hill & Charles Pigott, 2010. "China's Financial Sector Reforms," OECD Economics Department Working Papers 747, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:747-en
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    File URL: http://dx.doi.org/10.1787/5kmlh5n23mzs-en
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    Cited by:

    1. Danilov Yuri, 2016. "The experience of financial markets reforms in the countries – competitors of Russia in the global capital market," Research Paper Series, Gaidar Institute for Economic Policy, issue 171P, pages 156-156.
    2. Fungáčová, Zuzana & Pessarossi, Pierre & Weill, Laurent, 2013. "Is bank competition detrimental to efficiency? Evidence from China," China Economic Review, Elsevier, vol. 27(C), pages 121-134.
    3. Fan Xia & Gordon Walker, 2015. "How much does owner type matter for firm performance? Manufacturing firms in China 1998–2007," Strategic Management Journal, Wiley Blackwell, vol. 36(4), pages 576-585, April.
    4. Fungáčová, Zuzana & Korhonen, Iikka, 2011. "Like China, the Chinese banking sector is in a class of its own," BOFIT Discussion Papers 32/2011, Bank of Finland, Institute for Economies in Transition.

    More about this item

    Keywords

    actions non-négociables; banques commerciales; capital markets; China; Chine; financial sector; gestion des risques; liberalisation; libéralisation; management; marchés de capitaux; mouvements de capitaux internationaux; PME; prêts non productifs; risk; secteur financier; SMEs;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • H80 - Public Economics - - Miscellaneous Issues - - - General

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