The Financial Sector

Lynette Ong

in Chinese Studies

ISBN: 9780199920082
Published online April 2013 | | DOI:
The Financial Sector

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The financial sector plays a critical role in powering economic growth by intermediating between savers and borrowers. Hence, the financial sector in China is crucial for the functioning of its economy. The banking sector in China was established only in the mid-1980s, and full-fledged banks were developed only in the mid-1990s. Prior to that, China had a monobank system where the People’s Bank of China (PBoC) functioned as the central bank and the only bank in the country. With liberalization and development of the market economy, the financial sector had to be expanded to serve credit demands of companies and residents. Up to this day, the banking sector as a whole is predominantly state owned, and it remains heavily protected. To some extent, the banking sector is still a state instrument in fulfillment of the state’s objectives. Interest rates are still controlled by the government, and bank credit is frequently directed to state-favored companies and projects. China’s capital market remains at a rudimentary stage. Local stock markets are often utilized by provincial and municipal governments for political purposes. The rural banking sector was liberalized toward the end of the first decade of the 21st century to allow acquisitions of banking licenses by foreign institutions and cross-regional local banks. This is an important step in improving efficiency of rural savings, but many rural banking institutions still have inadequate corporate governance structure, as highlighted by some of the works in this bibliography.

Article.  3585 words. 

Subjects: East Asian Studies ; Asian History ; East Asian Philosophy ; East Asian Religions

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