Ever since 1978, the Chinese government gradually implemented reforms in the banking industry based on the success of the initial economic reforms. China's banking system, like the economy itself, has changed dramatically transforming from a single banking institution that acted as both a central bank and a commercial bank (the People's Bank of China), to one dominated by publicly traded ﬁrms driven by market fundamentals. According to Werner and Chung (2010), the Chinese banking industry has gone through mainly three periods of the reform to establish today’s landscape. The three periods are:
1978-84: Creating the State-Owned Commercial Banks and
Establishing the Central Bank.
1984-94: Shaping the Banking Landscape and Its Participants. 1994-Current: The Legal Foundation for Commercial Banking.
Although the Chinese banking system has improved in recent years, critical questions regarding their further development remain. In a keynote speech at the the Third National Financial Work Conference in January 2007, Premier Wen Jiabao emphasized six areas that required intensive efforts: deepening the reform of State Owned Commercial Banks, facilitating rural ﬁnancial reforms, developing the capital and insurance markets, improving the ability of ﬁnancial services and functions to adapt to economic development, opening ﬁnancial business actively and modestly to foreign entities, and strengthening supervision of ﬁnancial institutions. In this article, we would like to review a series of signiﬁcant transformations the Chinese banking industry has experienced in the last two or three decades. And then, we would like to discuss some challenges and trends in the further development of the Chinese banking system.
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