China's financial system under transition

the long version

The transformation of China's economy has involved major changes in the financial sector. This book offers a detailed and authoritative guide to financial reform since 1979. Bank loans replaced budgetary grants as the most important source of fund for investment. A two-tiered financial structure emerged consisting of a central bank and a system of specialized, newly created commercial banks. Nonbank financial institutions mushroomed. Money and capital markets appeared. Problems, however, remained. Specialized banks did not operate as proper profit-oriented banks. Macro-level resource allocation was controlled by credit plans. Lagged enterprise reforms and a lack of proper financial control mechanism resulted in macroeconomic imbalances. A system of indirect monetary control was not in place. This book outlines the process of change, examining the achievements and the problems. It looks at the impact of financial reform on the economy and discusses policy implications. It has an account of the former mono-banking system in China prior to 1979, and a discussion of the post-1991 reforms, in addition to the major reforms on the 1979-91 period which form the focus of the study. There is, in addition, a detailed case-study of the Shanghai financial markets.