Abstract

http://ssrn.com/abstract=1945259
 
 

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China’s Financial System: Opportunities and Challenges


Franklin Allen


University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)

Jun Qian


Boston College - Finance Department; University of Pennsylvania - Wharton Financial Institutions Center; China Academy of Financial Research (CAFR)

Chenying Zhang


University of Pennsylvania - The Wharton School

Mengxin Zhao


University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis; University of Alberta

October 15, 2011


Abstract:     
We provide a comprehensive review of China’s financial system, and explore directions of future development. First, the financial system has been dominated by a large banking sector. In recent years banks have made considerable progress in reducing the amount of non-performing loans and improving their efficiency. It is important that these efforts are continued. Second, the role of the stock market in allocating resources in the economy has been limited and ineffective. Further development of China’s stock market and other financial markets is the most important task. Third, the most successful part of the financial system, in terms of supporting the growth of the overall economy, is a non-standard sector that consists of alternative financing channels, governance mechanisms, and institutions. This sector should co-exist with banks and markets in the future in order to continue to support the growth of the Hybrid Sector (non-state, non-listed firms). Finally, in order to sustain stable economic growth, China should aim to prevent and halt damaging financial crises, including a banking sector crisis, a real estate or stock market crash, and a “twin crisis” in the currency market and banking sector.

Number of Pages in PDF File: 83

Keywords: banks, non-performing loans, markets, hybrid sector, financial crisis

JEL Classification: O5, K0, G2

working papers series


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Date posted: October 17, 2011  

Suggested Citation

Allen, Franklin and Qian, Jun and Zhang, Chenying and Zhao, Mengxin, China’s Financial System: Opportunities and Challenges (October 15, 2011). Available at SSRN: http://ssrn.com/abstract=1945259 or http://dx.doi.org/10.2139/ssrn.1945259

Contact Information

Franklin Allen (Contact Author)
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-3629 (Phone)
215-573-2207 (Fax)
HOME PAGE: http://finance.wharton.upenn.edu/~allenf/

European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Jun Qian
Boston College - Finance Department ( email )
Wallace E. Carroll School of Management
330 Fulton Hall
Chestnut Hill, MA 02467
United States
617-552-3145 (Phone)
617-552-0431 (Fax)
HOME PAGE: http://www2.bc.edu/~qianju
University of Pennsylvania - Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States
HOME PAGE: http://fic.wharton.upenn.edu/fic/
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Chenying Zhang
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
Mengxin Zhao
University of Alberta - School of Business ( email )
2-43 Business Building
Edmonton, Alberta T6G 2C7
Canada
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

University of Alberta ( email )
Rm 238, School of Business
University of Alberta
Edmonton, Alberta T6G2C6
Canada
7802481318 (Phone)
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