The political economy of banking reforms in China, 1993-1997

Journal of Contemporary China

Volumn 7, Issue 18, 1998, Pages 321-350

  Pei, Minxin ^a  

^a PRINCETON UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

BANKING; FISCAL REFORM; POLITICAL ECONOMY; REFORM PROCESS;

CHINA;

EID: 13144259717     PISSN: 10670564     EISSN: None     Source Type: Journal    
DOI: 10.1080/10670569808724318     Document Type: Article

References (100)

1. For assessments by Chinese economists, see Ceil R. Dipchand et al., The Chinese Financial System (Westport, CT: Greenwood Press, 1994); On Kit Tam, ed., Financial Reform in China (London: Routledge, 1995); Paul Bowles and Gordon White, The Political Economy of China's Financial Reforms (Boulder, CO: Westview Press, 1994); World Bank, China: Macroeconomic Stability in a Decentralized Economy (Washington, DC, 1995); William Byrd, China's Financial System: The Changing Role of Banks (Boulder, CO: Westview Press, 1983); Zhou Xiaochuan and Li Zhu, 'China's banking system: current status, perspective on reform', Journal of Comparative Economics 11, (1987), pp. 399-409.
2. For assessments by Chinese economists, see Ceil R. Dipchand et al., The Chinese Financial System (Westport, CT: Greenwood Press, 1994); On Kit Tam, ed., Financial Reform in China (London: Routledge, 1995); Paul Bowles and Gordon White, The Political Economy of China's Financial Reforms (Boulder, CO: Westview Press, 1994); World Bank, China: Macroeconomic Stability in a Decentralized Economy (Washington, DC, 1995); William Byrd, China's Financial System: The Changing Role of Banks (Boulder, CO: Westview Press, 1983); Zhou Xiaochuan and Li Zhu, 'China's banking system: current status, perspective on reform', Journal of Comparative Economics 11, (1987), pp. 399-409.
3. For assessments by Chinese economists, see Ceil R. Dipchand et al., The Chinese Financial System (Westport, CT: Greenwood Press, 1994); On Kit Tam, ed., Financial Reform in China (London: Routledge, 1995); Paul Bowles and Gordon White, The Political Economy of China's Financial Reforms (Boulder, CO: Westview Press, 1994); World Bank, China: Macroeconomic Stability in a Decentralized Economy (Washington, DC, 1995); William Byrd, China's Financial System: The Changing Role of Banks (Boulder, CO: Westview Press, 1983); Zhou Xiaochuan and Li Zhu, 'China's banking system: current status, perspective on reform', Journal of Comparative Economics 11, (1987), pp. 399-409.
4. For assessments by Chinese economists, see Ceil R. Dipchand et al., The Chinese Financial System (Westport, CT: Greenwood Press, 1994); On Kit Tam, ed., Financial Reform in China (London: Routledge, 1995); Paul Bowles and Gordon White, The Political Economy of China's Financial Reforms (Boulder, CO: Westview Press, 1994); World Bank, China: Macroeconomic Stability in a Decentralized Economy (Washington, DC, 1995); William Byrd, China's Financial System: The Changing Role of Banks (Boulder, CO: Westview Press, 1983); Zhou Xiaochuan and Li Zhu, 'China's banking system: current status, perspective on reform', Journal of Comparative Economics 11, (1987), pp. 399-409.
5. For assessments by Chinese economists, see Ceil R. Dipchand et al., The Chinese Financial System (Westport, CT: Greenwood Press, 1994); On Kit Tam, ed., Financial Reform in China (London: Routledge, 1995); Paul Bowles and Gordon White, The Political Economy of China's Financial Reforms (Boulder, CO: Westview Press, 1994); World Bank, China: Macroeconomic Stability in a Decentralized Economy (Washington, DC, 1995); William Byrd, China's Financial System: The Changing Role of Banks (Boulder, CO: Westview Press, 1983); Zhou Xiaochuan and Li Zhu, 'China's banking system: current status, perspective on reform', Journal of Comparative Economics 11, (1987), pp. 399-409.
6. For assessments by Chinese economists, see Ceil R. Dipchand et al., The Chinese Financial System (Westport, CT: Greenwood Press, 1994); On Kit Tam, ed., Financial Reform in China (London: Routledge, 1995); Paul Bowles and Gordon White, The Political Economy of China's Financial Reforms (Boulder, CO: Westview Press, 1994); World Bank, China: Macroeconomic Stability in a Decentralized Economy (Washington, DC, 1995); William Byrd, China's Financial System: The Changing Role of Banks (Boulder, CO: Westview Press, 1983); Zhou Xiaochuan and Li Zhu, 'China's banking system: current status, perspective on reform', Journal of Comparative Economics 11, (1987), pp. 399-409.
7. The PBOC owns 50% of the Bank of Communications; the other 50% is held by provincial and municipal governments and other state agencies. Only a small number of shares are owned by individuals.
8. At the beginning of 1997, there were 132 branches of foreign banks, 7 joint-venture banks, 5 wholly-owned foreign banks, 5 wholly-owned or joint-venture finance companies, 8 foreign insurance companies, and one joint-venture investment company in China. Nine foreign banks were allowed to conduct renminbi business in Pudong, Shanghai (six of them had begun renminbi operations); foreign financial institutions were allowed to set up operations in 24 cities. The total assets of foreign financial institutions at the end of 1996 were $30 billion (Xinmin Evening News, (22 May 1997), p. 1). At the end of 1995, foreign banks had assets of $19.1 billion, loans of $12.7 billion, and deposits Footnote 3 continued of $3.1 billion; foreign banks had 25% of the trade finance market in China in the mid-1990s. Raymond Blanchard, 'The heart of economic reform'. The China Business Review, (January-February 1997), p. 23.
9. At the beginning of 1997, there were 132 branches of foreign banks, 7 joint-venture banks, 5 wholly-owned foreign banks, 5 wholly-owned or joint-venture finance companies, 8 foreign insurance companies, and one joint-venture investment company in China. Nine foreign banks were allowed to conduct renminbi business in Pudong, Shanghai (six of them had begun renminbi operations); foreign financial institutions were allowed to set up operations in 24 cities. The total assets of foreign financial institutions at the end of 1996 were $30 billion (Xinmin Evening News, (22 May 1997), p. 1). At the end of 1995, foreign banks had assets of $19.1 billion, loans of $12.7 billion, and deposits Footnote 3 continued of $3.1 billion; foreign banks had 25% of the trade finance market in China in the mid-1990s. Raymond Blanchard, 'The heart of economic reform'. The China Business Review, (January-February 1997), p. 23.
10. The curb market interest rates in 1994 were 25-30% in southern China; with the inflation rate at 21.9% that year, the curb market rate was positive (real interest rate was 3-8%). Zhang Xiaohu, 'Woguo dangqian de huise jinrong lun' (A discussion of grey finance in contemporary China), Caimao jingji (Financial Economics) 3, (1996), pp. 42-44.
11. Jinrong shibao (Financial Times), (8 December 1996).
12. See Carsten Holz, The Role of Central Banking in China's Economic Reforms (Ithaca, NY: Cornell University East Asia Program, 1992).
13. See Yasheng Huang, Inflation Control in China: The Political Economy of Central-Local Relations (Cambridge: Cambridge University Press, 1996).
14. People's Bank, Jiangxi Provincial Branch Office, 'Zhuanzhi zhong de guoyou qiye yinhang zhaiquan wenti de diaocha baogao' (A research report on rights of banks as creditors in the transition of state-owned enterprises), Jingfi yanjiu cankao 63, (22 April 1996), p. 34.
15. In 1994, the PBOC owned 1,813 urban credit cooperatives, about 38% of the total UCCs in the country. The PBOC formed these entities to create employment for the children of their employees and generate revenues to increase the income of their employees. Zhou Liping, 'Dui zhendun chengshi xinyongshe de kanfa' (Views on consolidating urban credit cooperatives), Jinrong cankao (Financial Reference) 7, (1995), pp. 32-33.
16. For a discussion of financial disorder in China, see Haiqun Yang, Banking and Financial Control in Reforming Planned Economies (London: St. Martin's Press, 1996), pp. 131-176.
17. Yin Yanlin, 'Zhongguo xintuoye de fazhan yu zhanwang' (The development and prospects of China's trust companies), Jingji yanjiu cankao 21, (6 February 1995), pp. 11-14.
18. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi' (Analysis of the credit expansion by non-bank financial institutions and policy suggestions), Jingji yanjiu cankao 61, (19 April 1996), p. 2.
19. Yin Yanlin, 'Zhongguo xintuoye de fazhan yu zhanwang', p. 15.
20. Ouyang Weimin, 'Lun feiyinhang jinrong jigou de fazhan yu guanli' (On the development and supervision of non-bank financial institutions), Caimao jingji (Financial Economics) 1, (1996), p. 33.
21. Current regulations allow trust companies to take time deposits (one year and longer) only from four sources: investment funds from the government and supervisory agencies of SOEs; pension funds; research funds of research institutions; and funds of social organizations and foundations.
22. Yin Yanlin, 'Zhongguo xintuoye de fazhan yu zhanwang', p. 22.
23. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi' (Analysis of the credit expansion by non-bank financial institutions and policy suggestions), Jingji yanjiu cankao 61, (19 April 1996), p. 4.
24. Jingji daobao (Economic Herald) 2485, (2 September J 1996), pp. 26-27.
25. For a discussion of the leakages from the banking system via the interbank market, see World Bank, China: Macroeconomic Stability in a Decentralized Economy, (1995), pp. 49-51.
26. Xie Wei, 'Woguo jinrong shichang de xianzhuang, wenti, duice' (The current situation and problems of China's financial markets and their solutions), Jingji lilun yu jingji guanli (Economic Theory and Management) 1, (1994), p. 18.
27. On PBOC-monitored interbank markets, interest rates could float within 10-30% of a PBOC-set rate.
28. Zhang Xiaohui, 'Jianxi woguo zhuangui shiqide xindai zijin liudong' (A brief analysis of credit flows in our country's transitional period), Jingji sheluii tizhi bijino (Comparison of Economic and Social Systems) 3, (1995), p. 18; for the figure on 1993, see Table 6.
29. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi', p. 5.
30. The inefficiency of SOEs is the ultimate cause of their weakness. Such inefficiency is caused by the property rights arrangements of SOEs. However, the plight of Chinese SOEs worsened progressively in the 1980s as the country liberalized its economy and subjected previously protected SOEs to competition from domestic non-state firms and foreign firms.
31. Many scholars have studied the fiscal decline of the Chinese central government: see Christine Wong, 'Central-local relations in an era of fiscal decline', China Quarterly 128, (December 1991), pp. 691-715; Jun Ma, Intergovernmental Relations and Economic Management in China (London: St. Martin's Press, 1997); Asian Development Bank, Fiscal Management and Economic Reform in the People's Republic of China (Hong Kong: Oxford University Press, 1995).
32. Many scholars have studied the fiscal decline of the Chinese central government: see Christine Wong, 'Central-local relations in an era of fiscal decline', China Quarterly 128, (December 1991), pp. 691-715; Jun Ma, Intergovernmental Relations and Economic Management in China (London: St. Martin's Press, 1997); Asian Development Bank, Fiscal Management and Economic Reform in the People's Republic of China (Hong Kong: Oxford University Press, 1995).
33. Many scholars have studied the fiscal decline of the Chinese central government: see Christine Wong, 'Central-local relations in an era of fiscal decline', China Quarterly 128, (December 1991), pp. 691-715; Jun Ma, Intergovernmental Relations and Economic Management in China (London: St. Martin's Press, 1997); Asian Development Bank, Fiscal Management and Economic Reform in the People's Republic of China (Hong Kong: Oxford University Press, 1995).
34. Starting in 1984, banks were to assume the responsibility of working capital for SOEs; in 1986, banks took over the responsibility of lending to capital projects after the treasury stopped providing equity financing for these projects. By the mid-1990s, 98% of SOEs' working capital was financed by bank loans. Jingji cankaobao (Economic Reference Journal), (18 January 1996), p. 2.
35. Major state banks (the four specialized banks, Bank of Communications, three policy banks, and Citic Industrial Bank) could only lend 16% of their loan portfolio to non-state firms; other smaller regional banks allocated about 25% of their loans to SOEs, and half of their loans to non-state firms. Blanchard, 'The heart of economic reform'. Footnote 27 continued p. 17. In 1993, 79% of all outstanding loans (3.29 trillion yuan) were made to SOEs. Non-state firms provided 70% of the new growth of China's GDP. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi', p. 6.
36. Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun yu 9.5 jinrong fazhan zhanlue yanjiu' (The main contradictions in the financial sector during the 8th five-year plan, and a study of the strategy of financial development in the 9th five-year plan), Jingji yanjiu cankao 175, (14 November 1995), p. 5.
37. Chong Min, 'Zhiding yu pochan xiangpipei de caishui jinrong zhengce' (Making fiscal and financial policies compatible with bankruptcy), Caimao jingji (Financial Economics) 2, (1995), p. 25.
38. Tigaixinxi (System Reform Information) 16, (1996), p. 8.
39. Jinrong yanjiu baogao (Financial Research Report) (internal document) 26, (13 September 1996), p. 1. Zhongguo tongji nianjian, (1996), p. 22. A study conducted by the State Asset Management Administration estimated that 40% of all bank loans were considered non-performing. Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun yu 9.5 jinrong fazhan zhanlue yanjiu' (The main contradictions in the financial sector during the 8th five-year plan, and a study of the strategy of financial development in the 9th five-year plan), Jingji yanjiu cankao 175, (14 November 1995), pp. 2-13. Another figure quoted by the China Business Weekly reported that total non-performing loans in 1995 were 805 billion yuan or 14% of GDP, quoted in Blanchard, 'The heart of economic reform', p. 17.
40. Jinrong yanjiu baogao (Financial Research Report) (internal document) 26, (13 September 1996), p. 1. Zhongguo tongji nianjian, (1996), p. 22. A study conducted by the State Asset Management Administration estimated that 40% of all bank loans were considered non-performing. Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun yu 9.5 jinrong fazhan zhanlue yanjiu' (The main contradictions in the financial sector during the 8th five-year plan, and a study of the strategy of financial development in the 9th five-year plan), Jingji yanjiu cankao 175, (14 November 1995), pp. 2-13. Another figure quoted by the China Business Weekly reported that total non-performing loans in 1995 were 805 billion yuan or 14% of GDP, quoted in Blanchard, 'The heart of economic reform', p. 17.
41. Jinrong yanjiu baogao (Financial Research Report) (internal document) 26, (13 September 1996), p. 1. Zhongguo tongji nianjian, (1996), p. 22. A study conducted by the State Asset Management Administration estimated that 40% of all bank loans were considered non-performing. Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun yu 9.5 jinrong fazhan zhanlue yanjiu' (The main contradictions in the financial sector during the 8th five-year plan, and a study of the strategy of financial development in the 9th five-year plan), Jingji yanjiu cankao 175, (14 November 1995), pp. 2-13. Another figure quoted by the China Business Weekly reported that total non-performing loans in 1995 were 805 billion yuan or 14% of GDP, quoted in Blanchard, 'The heart of economic reform', p. 17.
42. Jinrong yanjiu baogao (Financial Research Report) (internal document) 26, (13 September 1996), p. 1. Zhongguo tongji nianjian, (1996), p. 22. A study conducted by the State Asset Management Administration estimated that 40% of all bank loans were considered non-performing. Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun yu 9.5 jinrong fazhan zhanlue yanjiu' (The main contradictions in the financial sector during the 8th five-year plan, and a study of the strategy of financial development in the 9th five-year plan), Jingji yanjiu cankao 175, (14 November 1995), pp. 2-13. Another figure quoted by the China Business Weekly reported that total non-performing loans in 1995 were 805 billion yuan or 14% of GDP, quoted in Blanchard, 'The heart of economic reform', p. 17.
43. Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun', p. 5.
44. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi', p. 4.
45. Sun Shuangrui, 'Dui zhuanye yinhang shangyehua gaige ruogan wenti de tantao' (A discussion of several issues of commercializing specialized banks), Caimaojingji (Financial Economics) 3, (1996), pp. 8-9. Tang Gaohuai, 'Dui woguo guoyou shangye yinhang jingying zhichan shouyi de fengxi' (An analysis of the return on assets in our country's state banks), Jingji yanjiu cankao 16, (28 January 1996), p. 9; Wu Xiaoling et al., 'Zhongguo jinrong tizhi gaige genzong yanjiu' (Research on reform of China's financial system), Gaige 4, (1997), p. 83.
46. Sun Shuangrui, 'Dui zhuanye yinhang shangyehua gaige ruogan wenti de tantao' (A discussion of several issues of commercializing specialized banks), Caimaojingji (Financial Economics) 3, (1996), pp. 8-9. Tang Gaohuai, 'Dui woguo guoyou shangye yinhang jingying zhichan shouyi de fengxi' (An analysis of the return on assets in our country's state banks), Jingji yanjiu cankao 16, (28 January 1996), p. 9; Wu Xiaoling et al., 'Zhongguo jinrong tizhi gaige genzong yanjiu' (Research on reform of China's financial system), Gaige 4, (1997), p. 83.
47. Sun Shuangrui, 'Dui zhuanye yinhang shangyehua gaige ruogan wenti de tantao' (A discussion of several issues of commercializing specialized banks), Caimaojingji (Financial Economics) 3, (1996), pp. 8-9. Tang Gaohuai, 'Dui woguo guoyou shangye yinhang jingying zhichan shouyi de fengxi' (An analysis of the return on assets in our country's state banks), Jingji yanjiu cankao 16, (28 January 1996), p. 9; Wu Xiaoling et al., 'Zhongguo jinrong tizhi gaige genzong yanjiu' (Research on reform of China's financial system), Gaige 4, (1997), p. 83.
48. Wu Xia, 'Guoyou yinhang kunjing fengxi' (An analysis of the difficulties of state banks), Jingji yanjiu cankao 82, (28 May 1995), p. 10. One estimate shows that of the loans lent to SOEs by large state banks in 1995, 15-20% was used to refinance SOE interest payment. Blanchard, 'The heart of economic reform', p. 17.
49. Wu Xia, 'Guoyou yinhang kunjing fengxi' (An analysis of the difficulties of state banks), Jingji yanjiu cankao 82, (28 May 1995), p. 10. One estimate shows that of the loans lent to SOEs by large state banks in 1995, 15-20% was used to refinance SOE interest payment. Blanchard, 'The heart of economic reform', p. 17.
50. Dai Xianglong, 'Jinrong tizhi gaige de jibeng shilu he nandian' (The basic approaches to and difficulties in reforming the financial system), Zhongyan dangxiao baogao xuan 9, (1994), p. 10.
51. Economic Herald, (18 August 1997), p. 20.
52. The Bank of Communications maintains the strongest capital adequacy ratio, with a core capital adequacy ratio of 5.57% in 1995. The Almanac of China's Finance and Banking 1996, p. 474.
53. Jing Xuecheng, 'Woguo jinrongye fengxian de xianzhuang' (The status of risks in our country's financial sector), Gaige 1, (January 1997), p. 48.
54. Sun Shuangrui, 'Dui zhuanye yinhang shangyehua gaige ruogan wenti de tantao', pp. 8-9.
55. Jinrong yanjiu baogao (Financial Research Report) (internal document) 26, (13 September 1996), p. 1. By the estimate of an American analyst, even if state banks stopped lending to SOEs immediately, recover half of their current non-performing loans, and write off all of their policy loans and deposit/loan interest subsidy losses, the total costs would be more than 20% of GDP and over four times the country's current bank capital. Blanchard, op. cit., p. 24.
56. Jinrong yanjiu baogao (Financial Research Report) (internal document) 26, (13 September 1996), p. 1. By the estimate of an American analyst, even if state banks stopped lending to SOEs immediately, recover half of their current non-performing loans, and write off all of their policy loans and deposit/loan interest subsidy losses, the total costs would be more than 20% of GDP and over four times the country's current bank capital. Blanchard, op. cit., p. 24.
57. Dai Xianglong, 'Zhixing shidu chongjin huobi zhengce' (Implement appropriately tight monetary policy) Zhongguo Jinrong (Chinese Finance) 2, (1996), p. 5.
58. Dai Xianglong, 'Jiuwu qijan renran yaoba zhili tonghuo pengzhang zhuowei shuoyao renwu' (Treating anti-inflation as the most important task during the 9th five-year plan), Zhongyan Dangxiao Baogao Xuan (Selected Reports to the Central Party School) 3, (1996), p. 8.
59. According to a study of the liquidation of bankrupt firms, 70% of the liability of bankrupt firms was owed to banks. Chong Min, 'Zhiding yu pochan xiangpipei de caishui jinrong zhengce' (Making fiscal and financial policies compatible with bankruptcy), Caimao jingji 2, (1995), p. 25.
60. One government investigation showed that in 1992, 57 billion yuan flowed into coastal areas, most of which invested in the real estate market. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi', p. 5.
61. The Almanac of China's Finance and Banking 1994, p. 34.
62. Zhonggno Jinrong 1, (1995), p. 19.
63. In 1995, the central bank set different payment reserve funds requirement for different banks: the ratio for Industrial and Commercial Bank was 6-10%; the ratio for Agricultural Bank was 7-9%; the ratio for Bank of China was 6-10%; the ratio for Construction Bank was 5-11%; and the ratio for Bank of Communications was 5-7%.
64. Yuan Xuzhou, 'Zhongguo jinrong tiaokong zhidu' (The system of financial control in China), Jingji kexue (Economic Science) 2, (1994), p. 4.
65. The Almanac of China's Finance and Banking 1994, p. 36.
66. Zliongguo Jinrong (Chinese Finance) 1, (1995), p. 19.
67. There were 16 specific measures, spelled out in No. 6 Document issued by the Central Committee of the Chinese Communist Party. With the exception of raising deposit rates to attract savers, all other measures were administrative orders.
68. The Almanac of China's Finance and Banking 1994, p. 36.
69. The Almanac of China's Finance and Banking 1994, p. 41.
70. The Almanac of China's Finance and Banking 1994, p. 22.
71. Zliongguo Jinrong 1, (1995), p. 19.
72. The official document on financial reforms was contained in one of the Communist Party's most important documents in the early 1990s. Titled 'The CCP Central Committee's Decision on Several Issues Concerning the Establishment of a Socialist Market Economy', the document was passed by in November 1993.
73. Wu Jinglian, 'Shichang jingji xingcheng de dangqian qingkuang he zhongqi qianjing' (The current situation of the formation of a market economy and medium term prospects), Zhongyang dangxiao baogao xuan (Selected Reports at the Central Party School) 9, (1993), p. 32.
74. The proposed financial reforms were discussed in 'Zhongguo jingji tizhi gaige zongti sheji' Project Team (General Design of the Reform of the Chinese Economic System) 'Guanyu jiakuai jinrong tizhi gaige de shexiang' (Some ideas on accelerating the reform of the financial system), Gaige (Reform) 5, (1993), pp. 93-97.
75. The NPC has little real power over the central bank. Article 6 of the law says that the central bank is only required to submit reports on monetary policy and prudential supervision to the National People's Congress each year.
76. Zhongguo gaige yufazhan baogao 1992-93 (The Chinese Reform and Development Report, 1992-93) (Beijing: Zhongguo caizheng jingji chubanshe, 1994), p. 115.
77. The central bank may, with the explicit permission of the State Council, make loans to specially designated non-bank financial institutions.
78. Under new rules, state banks are not allowed in the repo and T-bill spot markets; they may buy T-bills only on the primary market and sell T-bills only to the central bank.
79. Research Center of the State Council, 'Jinrong tizhi gaige zongti shexiang' (An overall blueprint for reforming the financial system), Jingji yanjiu cankao (Economic Research Reference) 2, (4 January 1997), p. 11.
80. Current interest rate policy allows urban credit cooperatives to set their loan rates 30% higher than the state banks' rate; rural credit co-ops can set it 60% higher; trust companies can set it 20% higher. Zhong Xiangping, 'Guanyu feiyinhang jinrong jigou xinyong kuozhang wenti de fengxi he zhengce jianyi', p. 7.
81. World Journal, (6 June 1997), C5.
82. This meant that only the specialized banks, 12 other banks and 11 urban cooperative banks could participate in the repo business in mid-1997.
83. World Journal, (16 June 1997), C5.
84. Reuters, (12 and 16 January 1997).
85. Current rules allow foreign banks to take renminbi deposits from foreign-invested firms in Shanghai or to borrow renminbi from the interbank market.
86. Reuters, (30 May 1996).
87. Jingji daobao (Economic Herald) 2479, (22 July 1996), p. 2.
88. Blanchard, 'The heart of economic reform', p. 17.
89. See Cao Wenlian, '8.5 jinrong linyu de zhuyao maodun yu 9.5 jinrong fazhan zhanlue yanjiu', pp. 2-13.
90. Wu Xiaoling et al., 'Zhongguo jinrong tizhi gaige genzong yanjiu', p. 95.
91. The Almanac of China's Finance and Banking, 1995, p. 485.
92. The Almanac of China's Finance and Banking, 1995, p. 512.
93. The Almanac of China's Finance and Banking, 1995, p. 484.
94. For a critique of the policy banks, see The Research Center of the State Council, 'Jinrong tizhi gaige zongti shexiang' (An overall blueprint for reforming the financial system), Jingji yanjiu cankao (Economic Research Reference) 2, (4 January 1997), p. 14.
95. Chen Caihong, 'Chengli zhengcexing yewude yinhang bushi zuihao de xuanze' (Creating policy banks is not the best choice), Gaige 2, (1995), pp. 28-33.
96. Liu Daneng, 'Zhengcexing yinhang: yunying zhongde wenti ji daojie' (Policy banks: operational problems and solutions), Caijin kexue (Financial Science) 2, (1996), pp. 30-31.
97. Wang Fenglin, 'Woguo jinrong tizhi gaige de fangxiang, nandian yu duice' (The direction, obstacles, and policy options in reforming our country's financial system), Jingji yanjiu cankao 82, (28 May 1995), p. 4.
98. Many studies have been done on the fiscal decline in China since 1979. See Christine Wong, (1996).
99. Calculated from the data in Table 1.4 in World Bank, The Chinese Economy: Fighting Inflation, Deepening Reform (Washington, DC: World Bank, 1996), p. 11.
100. The previous arrangement allowed provincial political leaders to pressure local branches of PBOC to increase the credit quota for local state banks and contributed to inflationary pressures.