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China's Banking Reform: The Remaining Agenda

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  • Charles Kwong

Abstract

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

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    1. Richard Podpiera, 2006. "Progress in China’s Banking Sector Reform: Has Bank Behavior Changed?," IMF Working Papers 2006/071, International Monetary Fund.
    2. Charles C. L. Kwong, 2009. "From Commercialization to WTO Accession," Chinese Economy, Taylor & Francis Journals, vol. 42(5), pages 8-20, September.
    3. Brehm, Stefan, 2008. "Risk Management in China's State Banks - International Best Practice and the Political Economy of Regulation," Business and Politics, Cambridge University Press, vol. 10(1), pages 1-29, April.
    4. Charles Kwong & Pak Lee, 2005. "Bad Loans Versus Sluggish Rural Industrial Growth: A Policy Dilemma of China's Banking Reform," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 10(1), pages 1-25.
    5. Yong Guo, 2002. "Banking Reforms and Monetary Policy in the People’s Republic of China," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-4039-1454-5, October.
    6. Mr. Marc G Quintyn & Mr. Bernard J Laurens & Mr. Hassanali Mehran & Mr. Tom Nordman, 1996. "Monetary and Exchange System Reforms in China: An Experiment in Gradualism," IMF Occasional Papers 1996/006, International Monetary Fund.
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    Cited by:

    1. Chen, Xudong & Yao, Liming & Xu, Zhenye & Xu, Qi, 2018. "Foreign entry and bank competition on financial products in China: A model of bank size," Pacific-Basin Finance Journal, Elsevier, vol. 49(C), pages 43-59.

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