Banking Reforms and Monetary Policy in the People’s Republic by Yong Guo (auth.)

By Yong Guo (auth.)

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By bundling the funds of many investors together, financial intermediaries can increase the size of transactions. And as the size of transactions increases, the cost per dollar investment decreases. Also, by bundling the funds of many investors together, the dollar cost per investor 20 Banking Reforms and Monetary Policy in China decreases. In addition, financial intermediaries can take advantage of standardization in their operations. For example, once a loan contract is written, it can be used over and over again, thereby reducing the cost per transaction.

409, 413; Jefferson and Rawski, 1994. growth investment-driven in the 1980s. Sending scholars overseas to learn about high technology and management, and increasing the investment in imports of manufacturing equipment from the Western world, dramatically speeded up technical progress and introduced efficient production practices. In the meantime it increased the demand for introducing the Western model of financial intermediary. Since investment is the principal determinant of growth, and domestic savings are the main source of finance for capital accumulation, studying the data for Chinese domestic savings helps to explain why reform of the commercial and central banking system was necessary and urgent for China at the beginning of the economic reform.

3). It shows that banks are reluctant to borrow from inter-bank lending because of the high interest rate. The `bad' loan for the first time showed up in the commercial banks' balance sheets in 1995. This is the start of PBC's financial supervision for defaulted loans, the details of which will be fully discussed in the later chapters. These four newly created mission-oriented commercial banks managed more than 90 per cent of the total banking assets in China. 3 (continued ) Liability Savings From enterprises From citizens Foreign currency Exchange Credit & investment business Brokerage Borrowed from central bank Short-term borrowing between banks Savings from other banks Issuing bonds Other Capital TOTAL Source: ACFB, 1998.

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Banking Reforms and Monetary Policy in the People’s Republic by Yong Guo (auth.)
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