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http://ssrn.com/abstract=978485
 
 

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China's Financial System: Past, Present, and Future


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)

Meijun Qian


National University of Singapore

March 28, 2007


Abstract:     
We examine the role of China's financial system in supporting economic growth, and explore directions of future development. First, the current financial system is dominated by a large but inefficient banking sector. Reducing the amount of non-performing loans among the major banks to normal levels is the most critical task for reforming the financial system in the short run. Second, the role of the stock market in allocating resources in the economy has been limited and ineffective. Further development of China's financial markets is the most important task in the long-term. 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: 63

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

JEL Classification: O5, K0, G2

working papers series


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Date posted: August 5, 2005  

Suggested Citation

Allen, Franklin and Qian, Jun and Qian, Meijun, China's Financial System: Past, Present, and Future (March 28, 2007). Available at SSRN: http://ssrn.com/abstract=978485 or http://dx.doi.org/10.2139/ssrn.978485

Contact Information

Franklin Allen
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 (Contact Author)
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

Meijun Qian
National University of Singapore ( email )
1 Business Link
Singapore, 117592
Singapore
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