China's Financial System: Opportunities and Challenges

83 Pages Posted: 10 Feb 2012 Last revised: 20 Mar 2022

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Jun "QJ" Qian

Fanhai International School of Finance, Fudan University

Chenying Zhang

University of Pennsylvania - The Wharton School

Mengxin Zhao

Independent; Securities and Exchange Commission (SEC)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2012

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. Second, the role of the stock market in allocating resources in the economy has been limited and ineffective. We discuss issues related to the further development of China's stock market and other financial markets. 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. The co-existence of this sector with banks and markets can continue to support the growth of the Hybrid Sector (non-state, non-listed firms). Finally, among the policies that will help to sustain stable economic growth in China are those that reduce the likelihood of 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.

Suggested Citation

Allen, Franklin and Qian, Jun and Zhang, Chenying and Zhao, Mengxin and Zhao, Mengxin, China's Financial System: Opportunities and Challenges (February 2012). NBER Working Paper No. w17828, Available at SSRN: https://ssrn.com/abstract=2002580

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
86-21-63895501 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.fisf.fudan.edu.cn/show-65-69.html

Chenying Zhang

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Mengxin Zhao

Independent

Securities and Exchange Commission (SEC) ( email )

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

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