the Chinese Banking system

Abstract

The Chinese banking system is critical to the functioning of the Chinese economy, being the main conduit through which savings are allocated to investment opportunities. Banking activity in China has grown rapidly over the past decade in association with the expansion of the Chinese economy, and the Chinese banking system now includes some of the world’s largest banks. Chinese banks have become more commercially orientated over this period, although the Chinese Government retains considerable influence over their activities. This article examines the size and structure of the Chinese banking system and the key characteristics of banking activity in China. The regulatory and institutional arrangements for banking in China are also outlined. Size and Structure of the Chinese Banking System The Chinese banking system is large relative to the size of the Chinese economy and has expanded significantly over the past decade. Consolidated banking system assets (including assets in Chinese banks ’ foreign branches and subsidiaries) were equivalent to around 240 per cent of GDP at the end of 2011, up from around 200 per cent in the early 2000s (Graph 1). Domestic credit is estimated to be equivalent to 145 per cent of GDP. This creditto-GDP ratio is high relative to countries with similar levels of per capita income (IMF 2011a). Other funding sources in China are less developed than intermediated credit: debt securities outstanding (excluding central government and central bank debt) and equity market capitalisation are each equivalent to around 30–40 per cent of GDP. 1 The five largest banks in China are, in order of decreasing size, Industrial and Commercial Bank of