The Heart of Economic Reform: China's Banking Reform and State Enterprise Restructuring
Abstract
Significant market-oriented reforms carried out in China have brought tremendous changes in the real sector. However, the reform of the financial sector has lagged that of the real sector. The weakness of the financial sector and the alarm of the Asian financial crisis have caught the attention of the leadership and in 1997-98, the government identified financial reform as the top priority in the reform agenda. This study examines how financial resources are misallocated under the current financial system in China, and the impact of such misallocation of capital on the strength of the banking sector, and on China's long-term economic growth. It also explores the reasons why financial reform that is needed to improve the efficiency in allocation of capital has been delayed and lagged real sector reform, by measuring and analyzing the costs of social services that the state-owned enterprises (SOEs) provided. In particular, it provides estimates of social welfare costs to SOEs and their effects on the profitability of the state sector, and draws implications on the sequence of social welfare reform, the state enterprise restructuring, and the reform of the banking system.
Document Details
- Document Type
- Technical Report
- Publication Date
- Mar 01, 1999
- Accession Number
- ADA373071
Entities
People
- Daochi Tong
Organizations
- RAND Corporation