NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

China's Financial System: Opportunities and Challenges

Franklin Allen, Jun "QJ" Qian, Chenying Zhang, Mengxin Zhao

Chapter in NBER book Capitalizing China (2013), Joseph Fan and Randall Morck, editors (p. 63 - 143)
Conference held December 15-16, 2009
Published in November 2012 by University of Chicago Press
© 2013 by the National Bureau of Economic Research

This chapter chronicles the development of China's financial system and compares it with those of other countries. Four main conclusions are drawn about the financial system and its future development. First, the large banking sector dominated by state-owned banks has played a bigger role in funding the growth of many types of firms than financial markets. Second, the stock market has been growing fast since 1990, but has played a relatively limited role in supporting economic growth. Third, alternative financing channels have supported the growth of the Hybrid Sector, which contributes most of the economic growth compared to the State and Listed Sectors. Finally, a significant challenge for China's financial system is to avoid damaging financial crises that can severely disrupt the economy and social stability.

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This paper was revised on May 30, 2014

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This chapter first appeared as NBER working paper w17828, China’s Financial System: Opportunities and Challenges, Franklin Allen, Jun “QJ” Qian, Chenying Zhang, Mengxin Zhao
Commentary on this chapter: Comment, Chenggang Xu
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