BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 32/2011:
Like China, the Chinese banking sector is in a class of its own
Zuzana Fungacova ()
and Iikka Korhonen ()
Abstract: This paper provides an overview of the Chinese banking
sector, which has expanded tremendously over the past two decades. We first
describe aggregate developments of the sector and compare them to the
situation in other countries. Also, various financial institutions that
operate in China are analyzed. Our results confirm that the Chinese banking
sector is truly in a class of its own, especially given the level of
China’s economic development. Despite significant reforms, the state and
various public organizations still own controlling shares in the largest
commercial banks. The state is also present on the borrowers’ side; it is
estimated that about half of state-owned commercial bank lending still goes
to state-controlled companies. In this way, the banking system can serve as
an important policy tool. Another distinctive feature of the Chinese
banking sector is the variety of its banking institutions. New types of
banking institutions, especially those serving rural areas, are emerging
all the time. While equity and debt markets are still tiny relative to the
banking sector and their importance as sources of financing of investment
remain minor, they have evolved rapidly in recent years.
Keywords: China; banking sector; state banks; (follow links to similar papers)
JEL-Codes: G21; G28; P34; (follow links to similar papers)
32 pages, December 13, 2011
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