Introduction to China Banking System

China’s economic growth and system modernization, from a purely socialist nature to a modernization with market economy characteristics, is a successful endeavour. Reform involves all institutions and all forms of life across the country.

The Chinese banking system is part of these reforms and is in the midst of a generation of reform plans, as it is transitioning to a more open system to support China’s rise as a global economy after decades of communism and state ownership . The plan started in the early 1980s and continues to this day.

Bank of China structure

China’s banking system used to be singular, and its central bank, the People’s Bank of China (PBoC), is the main entity authorized to conduct business in China. In the early 1980s, the government opened the banking system, allowing five state-owned professional banks to accept deposits and conduct banking business. The five specialized banks are Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BoC), Bank of Communications (BoCom) and Agricultural Bank of China (ABC).

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In 1994, the Chinese government established three more banks, each dedicated to a specific loan purpose. These decision-making banks include the Agricultural Development Bank of China (ADBC), China Development Bank (CDB) and the Export-Import Bank of China.

Professional banks have all conducted initial public offerings (IPOs) and have varying degrees of public ownership. Despite these initial public offerings, the majority of the shares in these banks are still held by the Chinese government.

China also allows more than a dozen joint-stock commercial banking institutions and more than 100 city commercial banks to conduct business in China. China also has banks that specialize in serving rural areas. Foreign banks are also allowed to set up branches in China and make strategic minority investments in many state-owned commercial banks.

In 2019, the total assets of China’s banking system were 285 trillion yuan, or 40.6 trillion U.S. dollars.

China Banking Regulatory

The main supervisory authority overseeing China’s banking system is the China Banking Insurance Regulatory Commission (CBIRC), which replaced the China Banking Regulatory Commission (CBRC) in April 2018. The China Banking and Insurance Regulatory Commission is responsible for formulating rules and regulations for the banking and insurance industries. China’s industry. It also inspects and supervises banks and insurance companies, collects and publishes statistics on the banking system, approves the establishment or expansion of banks, and resolves potential liquidity, solvency, or other problems that may arise in individual banks.

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The People’s Bank of China also has considerable power over China’s banking system. In addition to the typical central bank’s monetary policy responsibilities and representing the country in international forums, the role of the People’s Bank of China is to reduce overall risks and promote the stability of the financial system. The People’s Bank of China also supervises inter-bank lending and foreign exchange transactions, and oversees the country’s payment and settlement systems.

China Deposit Insurance

China’s deposit insurance regulations came into effect in May 2015. Deposit insurance is provided to protect depositors from loss of funds and eliminate the possibility of bank runs when negative rumors about specific bank issues spread. The agency also aims to help failed banks exit the industry with as little negative impact as possible.

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As of 2018, the People’s Bank of China had collected insurance premiums from financial institutions seven times, with a total of 4,017 institutions, with a balance of 82 billion yuan, equivalent to US$11.6 billion. As of mid-May 2019, no trigger events have been announced.

Bottom line

The Chinese economy has boomed in the past few decades, and its institutions have also been modernized. Compared with the previous economic system based on communist ideals, the economic system has also gained more independence under the social market economy. As these changes continue to take shape, China’s banking system continues to carry out reform plans to transition from state-owned to private ownership, and support the transformation of the economy to a capitalist form, which is expected to take many years.


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