Download this Paper Open PDF in Browser

China’s Financial System: Opportunities and Challenges

83 Pages Posted: 17 Oct 2011  

Franklin Allen

Imperial College London

Jun Qian

Fanhai International School of Finance, Fudan University; University of Pennsylvania - Wharton Financial Institutions Center

Chenying Zhang

University of Pennsylvania - The Wharton School

Mengxin Zhao

Securities and Exchange Commission (SEC)

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

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

JEL Classification: O5, K0, G2

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: https://ssrn.com/abstract=1945259 or http://dx.doi.org/10.2139/ssrn.1945259

Franklin Allen (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Jun Qian

Fanhai International School of Finance, Fudan University ( email )

Shanghai
China
86-21-62934520 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.saif.sjtu.edu.cn/en/professors/2101

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/

Chenying Zhang

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Mengxin Zhao

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Paper statistics

Downloads
330
Rank
60,063
Abstract Views
1,479