Who Pays China's Bank Restructuring Bill?

Guonan Ma
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Guonan Ma: Senior Economist, Representative Office for Asia and the Pacific Bank for International Settlements, 78/F Two International Financial Centre, 8 Finance Street, Central Hong Kong, SAR, China

Asian Economic Papers, 2007, vol. 6, issue 1, pages 46-71

Abstract: This paper addresses questions related to the cost of China's bank restructuring and financing. We first propose a framework for recognizing losses. Then, we examine the recent major moves by the Chinese government to repair the country's bank balance sheets. Finally, we explore the implications of the Chinese ways of funding the bank restructuring. We find that the Chinese government has been decisive in confronting the costly task of bank restructuring. Looking through the elaborate funding arrangements adopted so far, the Chinese taxpayers have paid most of the bill. (c) 2007 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

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