The Challenges Confronting the Banking System Reform in China: An Analysis in Light of Japan's Experience of Financial Liberalization

Kumiko Okazaki, Masazumi Hattori and Wataru Takahashi
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Kumiko Okazaki: Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: kumiko.okazaki@boj.or.jp)
Masazumi Hattori: Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: masazumi.hattori@boj.or.jp)

No 11-E-06, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: China's banking system reform has made notable progress since 2002. After restoring their balance sheets, Chinese banks have aggressively increased lending and contributed to supporting the country' s economy given the global financial crisis. Thus far, the regulated deposit and lending interest rates, undeveloped capital markets, and restrictions in cross-border capital transactions have given banks an advantage in gaining profits. However, along with the full-blown reform of the economic system toward a market-oriented economy, the conditions protecting banks' profits will change in the future. The experiences of Japanese banks under the financial liberalization that occurred during the 1970s and 1980s indicate how important it is for commercial banks to change their business models in accordance with the fundamental changes in the economy. These experiences may be useful for considering the subsequent reform process of the financial system in China.

Keywords: Banking System Reform; Financial Liberalization; State-owned Commercial Banks; Rent for Banks (search for similar items in EconPapers)
JEL-codes: G21 O16 O53 P34 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-ban, nep-reg and nep-tra
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Citations: View citations in EconPapers (4)

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