Banking reforms have played an important role in China’s overall effort to transform a centrally planned economy into a market-based economy since 1978. Although the banking sector has undergone remarkable changes over the period, deep-seated structural problems of asset quality, capital adequacy and profitability continue to pose a challenge to the sector. China quickened the pace of reform in 1998 and seems to be aware of two lessons that can be drawn from the Asian financial crisis. The first lesson is that a sound banking system is crucial for an economy to withstand external shocks. The second lesson from the Japanese banking saga is that delay only allows NPL’s to grow and erode bank capital. Chinese leaders have shown their commitment to reform; nonetheless, a long and painful period of banking and SOE reform is inevitable. During the last year, China has ostensibly accelerated reform of the banking sector with the main thrust addressed towards disposition of the cumulated non-performing loans (NPL’s) – both bad loans inherited from the past and new loans. The present volume is conceived against this backdrop to provide an in-depth analysis of the banking reforms in China. The book is divided into three sections, to help readers with an appropriate analysis of the pros and cons of the reform process, the mode of implementation of the reform process, apart from looking at the path of progress that such reform shall entail in the future.
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