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The chinese financial system at the Dawn of the 21st century: An Overview

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  • Yulu, Chen
  • Yong, Ma
  • Ke, Tang

Abstract

Based on a systematic review and summarization of China’s 30 years of financial reform and development, this paper comprehensively analyzes the past, present and future development of China’s financial system and also presents the mechanism for China’s financial development from the view of political economics. Generally, the Chinese financial system is bank-oriented. The property rights structure, led by state-owned banks, is the prominent feature of the Chinese banking system. Equity, bond, money, currency and real estate markets have been developing rapidly; however, the development rate of these markets varies, and institutional construction generally falls behind the market development. China’s financial decision-making authority belongs to the State Council, and the financial supervision system adopts the mode of “separate regulation.” China’s state-driven, progressive financial reforms have promoted the formation of the government-led financial structure, which is composed of three parts: first, monetary policy, balancing both inflation control and economic growth; second, bank credit expansion under the implicit guarantee of the state; and third, the adjustable pegged exchange rate system based on capital controls. The next phase of financial reform in China will mainly focus on the following four key goals: first, to further improve the corporate governance and the mixed operation of financial institutions; second, to construct the institution of a financial market system and improve the effectiveness of the financial markets; third, to re-integrate regulatory resources, combine macro- and micro-prudent views, and establish a comprehensive framework for financial stability; fourth, to promote the liberalization of interest rates, marketization of the exchange rate and the opening of capital accounts based on a progressive approach and to improve the openness of the financial system based on macroeconomic stability.

Suggested Citation

  • Yulu, Chen & Yong, Ma & Ke, Tang, 2011. "The chinese financial system at the Dawn of the 21st century: An Overview," MPRA Paper 36027, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36027
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    File URL: https://mpra.ub.uni-muenchen.de/36027/1/MPRA_paper_36027.pdf
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    References listed on IDEAS

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    1. Philip Arestis & Panicos Demetriades, 1995. "Finance and Growth: Is Schumpeter 'Right'?," Keele Department of Economics Discussion Papers (1995-2001) 95/11, Department of Economics, Keele University.
    2. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
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    Cited by:

    1. Zhou, Weina, 2014. "Brothers, household financial markets and savings rate in China," Journal of Development Economics, Elsevier, vol. 111(C), pages 34-47.

    More about this item

    Keywords

    China; Financial System; Bank-oriented; Political Economics;

    JEL classification:

    • K0 - Law and Economics - - General
    • G2 - Financial Economics - - Financial Institutions and Services
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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