| Summary: | The surprising growth rate of China's economy has been put important attention by the rest of the world. However, whether China's economy could keep on developing at such rate is pending. Since one country's economy cannot grow healthily and rapidly without the support of an appropriate financial system, it is very important to analyze the factors that affect China's financial system for the further development of its financial system, and thereby its economy.
This paper primarily uses secondary data to investigate the determinants of China's financial system through the systemic analysis of four sample countries-UK, US, Germany and Japan. The main finding is that four important factors (the first three factors are common with the four sample countries, and the last one is unique to China case) contribute to China's financial system-investors protection based on legal environment; legal and regulation factors without consideration of investor protection; collectivism and long-term orientation dimensions of national culture; and interventionist Chinese government and its special relationship with banks and listed companies.
The present China's financial system is plagued by two problems-huge amount of NPLs sited in state-owned commercial banks and underdeveloped China's capital market. The future of China's financial system is to resolve these problems for continuous development of China's economy. Although Chinese government has taken some measures to resolve such problems such as the establishment of four AMCs to transfer away part of NPLs for state-owned banks, these measures cannot resolve these two problems existing in China's financial system completely. Chinese government should reset these measures in terms of these important the factors that affect China's financial system to better resolve these problems.
|
|---|