The Development and Transformation of the Financial System in the People's Republic of China
- Damian Tobin, Ulrich Volz
- Mar 2018
- Asian Development Bank (ADB)
- International
This paper looks 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. It describes 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. 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.
