Financial reform in China | |
| Author | Li, Dong |
| Call Number | AIT RSPR no. SM-00-66 |
| Subject(s) | Banks and banking--China Financial institutions--China--Management |
| Note | A research study submitted in partial fulfillment of the requirements for Master Degree of Business Administration, School of Management |
| Publisher | Asian Institute of Technology |
| Series Statement | Research studies project report ; no. SM-00-66 |
| Abstract | China's outstanding economic performance since it began to implement market-oriented reforms in 1978 has sparked much interest and applause. Now, The transitional period after China joins the World Trade Organization (WTO) and before it fully opens its financial sector will be crucial to China's financial reform. In order to integrate the domestic financial system into an international financial system, China needs to deepen its financial reform in line with modern financial rules and work hard to reduce financial risks within this transitional period. While focusing on the banking and financial system to highlight the importance of the reform challenges that lie ahead for China, attention should be paid to the evolution of the stateowned enterprise sector in the post-refonn period and the weaknesses that have emerged. Cunently, the main obstacle preventing the State special banks from deepening their refmm is the heavy burden of bad assets. Most of these bad assets stem from State-owned enterprises' high debt-to-asset ratio. To open China's financial market, the commercialization of the four State banks should be accelerated in combination with handling the bad assets. The enterprise losses in this sector have mounted steadily over the past twenty years, while fiscal subsidies to nonviable firms have declined. At the same time, state-owned enterprises have been excessively burdened with wage payments, employment, and social responsibilities, which-together with asset stripping (the illegal transfer of state assets to non-state ownership) and reforms in accounting and the tax system-have caused their financial indicators to deteriorate. The banks, which have lent the bulk of their funds to state-owned enterprises, have suffered a similar fate. The poor financial health of the state banks is due to their limited ability to assess projects on a commercial basis and due to the legacy of two decades of lending on a noncommercial basis. To complete its transition to a market economy and sustain economic growth, China must strengthen its banking system and place it on a sound commercial footing. In this connection, a solution po1ifolio should include bank recapitalization, increased competition, interest rate liberalization, enhanced prudential regulation and supervision, rationalization and reduction of bank taxation, and increased independence of the central bank. These must be accompanied by reforms of state-owned enterprises and public finances, including a strengthened bankruptcy law to protect creditors and the mobilization of additional tax revenue to finance bank recapitalization and enterprise reform. Finally, the State should aim to perfect its financial rules to increase transparency. The regulatory authorities should publicize their policy adjustments. A compulsory information disclosure system for financial institutions should also be established to guarantee investor and customer rights to learn the truth |
| Year | 2000 |
| Corresponding Series Added Entry | Asian Institute of Technology. Research studies project report ; no. SM-00-66 |
| Type | Research Study Project Report (RSPR) |
| School | School of Management |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Tang, John C.S; |
| Examination Committee(s) | Swierczek, Fredric W.;Truong Quang; |
| Scholarship Donor(s) | Asian Institute of Technology Partial Scholarship; |
| Degree | Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 2000 |