Chinese Financial System - Banking Reform

Banking Reform

Financial reform in China's banking sector include the introduction of leasing and insurance, and operational boundaries are being slowly eroded to promote competition for customers who are now permitted to choose banks as well as hold accounts in more than one bank.

Banking reform was initiated in China in 1994, and the Commercial Banking Law took effect in July 1995. The aims of these actions were to strengthen the role of the central bank—the People’s Bank of China—and to allow private banks to be established. The People’s Bank of China was established in 1948. It issues China’s currency and implements the nation’s monetary policies. China’s oldest bank, founded in 1908, is the Bank of Communications Limited, a commercial enterprise located in Shanghai. China’s second oldest bank was established in 1912 as the Bank of China. Since 2004 it has become a shareholding company known as the Bank of China Limited and handles foreign exchange and international financial settlements. The Agricultural Bank of China, founded in 1951, is mainly involved in rural financing and the provision of services to agricultural, industrial, commercial, and transportation enterprises in rural areas. Other major banks include the China Construction Bank; established in 1954 as the People’s Construction Bank of China, it has been a state-owned commercial bank since 1994 and maintains some 15,400 business outlets inside and outside China, including six overseas branches and two overseas representative offices. The China Construction Bank was restructured in 2003 into a shareholding bank called the China Construction Bank Corporation, with the state holding the controlling shares. CITIC was founded in 1979 to assist economic and technological cooperation, finance, banking, investment, and trade. The Industrial and Commercial Bank of China was founded in 1984 to handle industrial and commercial credits and international business. The Agricultural Development Bank of China, Export and Import Bank of China, and State Development Bank all were founded in 1994. China’s first private commercial national bank, the China Minsheng Banking Corporation, was opened in 1996. Commercial banks are supervised by the China Banking Regulatory Commission, which was established in 2003. In 2005 the commission announced the launching of a new postal savings bank to replace the old system and its more than 36,000 outdated outlets nationwide.