China Features Unique Banking and Finance Traits

While banking is a major part of the Chinese economy, it has developed in a way much different than most financial systems have. As a communist state, the government plays a large role in managing the banking system as a whole, although certain banks are allowed some level of autonomy. In an effort to understand China’s banking and finance structure, four important classes of banks can be identified.  These are the primary banks, The People’s Bank of China, policy banks, city banks, and also foreign banks.

The People’s Bank of China – This bank is in charge of making most of the country’s extensive financial decisions. These policies involve payment, clearing and settlement systems, as well as foreign exchange and the nation’s gold reserve.  By law, the bank is able to set rates for all banks and state bonds. The bank’s mission is to make a safe finance system for all in China, but its decisions affect the economies of other countries as well.

Policy Banks – China’s major policy banks are the China Development Bank (CDB), the Ag Development Bank of China (ADBC), and the Export-Import Bank of China (Chexim). These banks manage matters of trade and state investments. The ADBC handles all farm and many of the rural projects, while the CDB provides financing for big building projects. Chexim is in charge of managing trade partnerships.

City Banks – Smaller city banks are also important to the Chinese banking industry. There are nearly 150 such banks that fund small loans and work on local projects with businesses. They may also fund some local building tasks and give out short-term loans. City banks are important to groups outside larger interactions with the state.

Foreign Banks – China’s fiscal growth is very attractive to those outside of the country. As such, many large foreign banks keep offices or branches in China. Such groups include Citicorp, Bank of America, and Goldman Sachs.

The world of banking in China has changed from its state in the past. Before the ways of planned economy took precedence over total communist control, outside banks had little interest in working with China. Today, however, things have changed. China now has what is close to a free trade system in place, allowing greater flexibility to banks and investors. Additionally, the Internet and electronic banking have affected the ways in which banking is carried out in China. While much different than many models of finance, China has shown itself capable of traversing the complex field of banking.