The Development and Transformation of the People’s Republic of China’s Financial System

Damian Tobin and Ulrich Volz

No 825, ADBI Working Papers from Asian Development Bank Institute

Abstract: We look at the development and transformation of the People’s Republic of China (PRC)’s financial system since the start of economic and financial reforms in 1978. We describe how despite the rapid development of capital markets since the 1990s, the PRC’s financial system continues to be dominated by bank lending. Reforms have not eliminated the credit expansion impetus of large commercial banks, while the effectiveness of capital-based constraints and administrative measures is far below potential. Large state-owned banks have become important players in bond and equity markets, as well as important sources of liquidity provision for smaller commercial banks and a range of non-bank financial institutions through a combination of inter-bank funding activities, wealth management products, and shadow banking/grey capital market activities. The importance of non-bank financial institutions has also continued to grow. Off-shore markets have increased the overseas holdings of financial assets, but their potential remains limited by capital controls and the fragility of the domestic financial system. An unintended consequence of this is that although the PRC’s state run financial system has become more complex and more interconnected domestically, foreign participation remains low.

Keywords: China; financial markets; financial institutions; economic transformation (search for similar items in EconPapers)
JEL-codes: G01 G02 O16 P34 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-03-20
New Economics Papers: this item is included in nep-cna, nep-knm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbiwp:0825

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