Introduction to the Chinese banking system

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China’s financial progress and the modernization of its institutions of a purely socialist nature to those with market-economy traits, has been a fruitful enterprise. The reforms affected all establishments and all walks of life throughout the nation.

China’s banking system is part of these reforms and is in the midst of a generational program of adjustments as it moves to a more open system that supports China’s emergence into the international economy after a long period of communism and owned by the state. This system started in the early 80s and continues to this day.

Chinese language banking construction

China’s banking system was monolithic, with the People’s Bank of China (PBoC), its central financial institution, being the main entity authorized to conduct operations in the country. In the early 1980s, the federal government opened up the banking system and authorized five specialized state banks to accept deposits only and conduct banking business. These 5 specialized banks are China Industrial and Industrial Finance Institution (ICBC), China Construction Finance Institution (CCB), China Finance Institution (BoC), Communications Finance Institution (BoCom) and China Agricultural Financial Institution (ABC).

In the mid-1990s, Chinese authorities established three additional banks, each dedicated to a specific lending purpose. These policy banks include China Agriculture Improvement Financial Institution (ADBC), China Improvement Financial Institution (CDB), and China Import-Export Financial Institution.

The specialized banks have all made prior public choices (IPO) and have different levels of ownership by the general public. Regardless of these IPOs, the banks are still majority owned by the Chinese authorities.

China has also licensed a dozen joint-stock commercial banks and more than 100 city commercial banks to operate in the country. There are also banks in China dedicated to the rural areas of the country. Foreign banks were also allowed to audit branches in China and make strategic minority investments in most state-owned merchant banks.

The overall assets of China’s banking system stood at 288.6 trillion yuan, or $42.7 trillion, as of the end of 2021.

Banking regulations in Chinese language

The main regulatory body that oversees the Chinese language banking system is the China Banking Insurance cover Regulatory Fee (CBIRC), which amended the China Banking Regulatory Fee (CBRC) in April 2018. The CBIRC is responsible for drafting the principles and rules governing the banking system. and insurance coverage sectors in China. It also conducts examinations and supervision of banks and insurers, collects and publishes statistics on the banking system, approves the establishment or growth of banks, and resolves potential liquidity, solvency or other problems. that may occur in some banks.

The People’s Bank of China also has considerable authority over China’s banking system. Besides the usual obligation of central financial institutions for financial coverage and representation of the country in a global discussion forum, the position of the PBoC is to reduce total risk and promote the stability of the monetary system. The PBoC further regulates overseas lending and trade between banks and oversees the country’s payment and settlement system.

Chinese language deposit insurance coverage

China’s deposit insurance coverage rules came into effect in May 2015. Deposit insurance coverage is offered to protect depositors from lack of funds and to get rid of the risk of a run on the financial institution if unfavorable rumors spread about problems with a selected bank. Financial institution. The business may be intended to help failed banks exit the business with as little negative influence as possible.

China’s central bank reported in April 2021 that it had collected insurance premiums from monetary institutions from a total of 4,024 institutions with a balance of 42.38 billion yuan, or 6.27 billion. dollars.

The back line

China’s economic system has grown dynamically in recent years and its institutions have been modernized. Financial institutions have further gained more independence under a social market economic system than under a system that was previously based primarily on communist beliefs. As these adjustments take shape, the Chinese banking system continues to carry out a reform program to move from state to personal ownership and to help shift the economic system to a type of capitalism, which should take a few years.

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