Restraining the Payment Capability of China's Grass-Roots Banks

The writers have made an on-the-spot inspection of grass-roots banks of the Industrial and Commercial Bank of China in a number of cities experimenting with monetary reform. On the basis of our inspection, we summed up the features of the current banking system in China as being similar to other countries with a planned economy, namely, that money is not a positive instrument affecting the course of reproduction but only a negative reflection of this course. We went a step further to draw the conclusion that China's grass-roots banks today are characterized by "large reserves, lax restrictions, and low risks." We believe that to ensure the success of reform of the monetary system, restraints on the payment capability of the grass-roots banks should be strengthened from the very beginning, prudently and step by step. In this connection, we put forward a number of proposals on matters of policy.