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China Remodels Banking Sector

For many years, China`s banking model was remarkably different from that observed in most parts of the world, but unsurprising given the People`s Republic`s repressive political system combined with a command economy. However, even as China has kept strict control over its political structures in recent years, it has opened up its banking sector to facilitate economic growth.

While cronyism and corruption have accompanied the opening up of China`s banking sector, China has been moving away from merely gathering savings from ordinary citizens and channeling them to Party priorities. Presently, Non-Performing Loans constitute more than 20% of the outstanding loans for the overall banking sector in China, representing a fallout of the planned economic model of the Communist Party.

It appears that the winds of change are now not simply perceptible in the Chinese banking sector market - they are seen as essential. China`s Banking Regulatory Commission asserts that the share of Non-Performing Loans for domestic banks was recorded at 19.7% in June 2005, a decrease of 3.52 points from the beginning of the year.