1. CompositionChina’s current financial system including six organizations, which are The People’s Bank of China, the state-owned commercial banks, joint-stock commercial banks, policy banks, non-bank financial institutions, foreign banks and foreign financial institutions. Moreover, the financial regulation of the financial system in China is the People’s Bank of China, the financial regulators is the China Banking Regulatory Commission.
In addition, most of financial assets occupied by the four major banks, which are the Industrial and Commercial Bank of China (ICBC), the China Construction Bank (CCB), the Bank of China (BOC) and the Agricultural Bank of China (ABC). Specific structure can show the following picture (Global Macro Monitor 2011).
2. ProblemsChina is an emerging market, the legal system is not yet perfect, and the supervision of the market itself is still not perfect, so it will have some problems, China’s financial system need to recognize the current problem, find a solution, and the establishment of a stable financial system. In relation to the problems of financial system in China, four aspects can be concerned (Denoon 2012). 2.1 Bank branches complicate Branches of the People’s Bank of China are setting according to administrative, agencies messy and overstaffing, is not conducive to the improvement of financial regulation and efficiency.
2.2 Poor of role of state-owned commercial banks State-owned commercial banks as a financial enterprise, self-discipline and independent management functions are not fully embodies, there are many problems, for example, the unified corporate management, institutional setup, internal control and inadvertently management and so on (Fell 2012).
2.3 Financial supervision is not enough Financial market access and exit mechanisms are inadequate, there is no strict control mechanism of market access, and market exit is also a lack of timely and effective control.
2.4 Weak Science and Technology With the accelerated pace of economic and financial, science and technology in the financial business is more and more important, for example, the use of a variety of payment card.
3. MeasurementIn order to achieve healthy and stable development of the financial system, we should find a good way to solve these problems, to build a balanced development of the financial system of banks and financial markets. There are three aspects for the solution following the suggestions from Viñ and Singh (2011). als 3.1 Open modern framework of the country’s financial system China’s financial system is bank-based, resulting in a single financing structure, increase the risk of the banking system. In addition, with the expansion of opening up to the outside world, need to establish a certain size and depth of capital markets to adapt to the international trading.
3.2 Steady progress in the financial industry Mixed Financial Holdings is the trend of China’s financial industry Mixed, in the form of a financial holding company, with relative independence between subsidiaries operating in different financial business, so there is no impact each other, it can improve the overall competitiveness of the financial industry.
3.3 Orderly fashion capital account opening China as an open country, need to actively participate in the economic and financial globalization, it is necessary for capital account liberalization. Moreover, the RMB internationalization needs to improve.
References Denoon BH 2012, The Evolution of China’s Financial System,
http://www.chinausfocus.com/slider/the-evolution-of-china%E2%80%99s-financial-s ystem/, viewed 21 March 2013
Fell C 2012, Fragile state of China’s financial system, http://www.irishtimes.com/business/fragile-state-of-china-s-financial-system-1.55435 7, viewed 19 March 2013
Global Macro Monitor 2011, Chart of the Day: China’s Financial Architecture, http://www.creditwritedowns.com/2011/12/chinas-financial-architecture.html, viewed 18 March 2013
Viñ J, Singh A 2011, People’s Republic of China: Financial System Stability als Assessment, http://www.imf.org/external/pubs/ft/scr/2011/cr11321.pdf, viewed 20 March 2013