The banking system is a combination of different national banks, as well as credit organizations, which operate within the framework of a single monetary policy.
The formation of the banking system of China
China's current banking system is relatively young. Its formation can be slaved into four stages.
The first stage is 1848-1911. Under the rule of the Qing Dynasty in China, there were both "traditional" and "modern" systems. The first had a centuries-old history, but was feudal. These banks until 1900 on the basis of ancient customs served more than half of all trade operations.
The modern system was formed due to the formation of a branch network of foreign banks. They occupied the main positions and dictated the conditions in the banking sector.
The second stage - 1912-1948. It was characterized by the strengthening role of the country's national banks. Only 164 banks, but the central bank, the Bank of Communications and the Peasant Bank controlled the policy in the financial market.
The third stage - 1949-1978. China's banking system has become the largest in the world.
The fourth stage is from 1979 to the present. The development of the banking sector proceeds as part of the economic reform that began in 1979.
China Banking System
The activities of banks are regulated by the state. The structure of China's banking system includes two levels. The first is the central bank, followed by specialized state and commercial banks.
The functions of the central regulator are performed by Halyk Bank. Its capital is fully funded by the state.
The NBK regulates the work of monetary organizations. He decides on the creation, termination of their activities and approves the list of operations.
Commercial banks can be divided into two groups: located on the mainland and located in Hong Kong (better known as Hong Kong). There is no central bank in this administrative district. Capital moves without limits.
The Chinese banking system provides for the establishment of a commercial bank after considering this issue of the NBK and making a specific decision.
Within the PRC, banks are prohibited from:
- engage in stock transactions;
- invest in real estate that is not intended for your needs;
- invest in non-banking organizations and enterprises.
China's banking system also includes credit cooperatives and city cooperative banks.
The banking system was based on the task of creating at the head of the pyramid of different banks a single centralized bank with a network of branches, which is able to concentrate both the issue of money and the bulk of the operations.
Features of the Chinese banking system are that it is one of the most dynamic components of the economy, and also that tight control over the work of commercial banks is carried out by the state through the NBK.
Foreign banks
In China, foreign banks and their branches are active.
Since 1979, foreign organizations are allowed to form representative offices in special economic zones. But they could be engaged exclusively in market research, economic analysis, and establishing contacts with the Chinese authorities.
The largest number of foreign banks opens in areas of concentration of companies with foreign investment.
Central Bank Policy on the RMB
For Halyk Bank, the issue of liberalizing the exchange rate remains a key one.The bank president noted that China will work on the stability of the renminbi on a rational basis.
When considering the settlement of the national currency, the following factors should be taken into account: a stable macroeconomic situation is needed; a reform is needed that can ensure uniformity in the exchange rate; the interplay of changes in the renminbi and the global economy should be considered.
The role of the Central Bank in the banking system
The main tasks of the Central Bank are: liberalization of interest policy, establishment of free deposit and credit interest rates, solution of pricing issues. Rates are not an indicator of the deficit of available funds. Solid interest rates on deposits and loan rates set each year are extended to all banks.
About 40% of the population’s income is invested. Given the level of development of China, this can be considered a high indicator. This is explained, on the one hand, by the well-known frugality of the Chinese, and on the other, such behavior of the population stems from the state of the economy, the need to have savings, and the desire to get an education.
With the implementation of the NBK’s interest rate liberalization plans, this “mountain of savings” can move, causing a change in the structure of deposits.
Protection of household deposits
The deposit protection system is part of the country's public and financial security system. All savings should be protected against risks through a separate authority. Protection of deposits reduces the risk of risks, helps to increase confidence in banks.
Because of the need to comply with the requirements of the WTO, the PRC has much to do to eliminate the shortage of skilled workers and create a quality surveillance system.
For transparency, the central bank of the Republic of China has implemented a computer system with short reporting periods. Effective supervision will be ensured by eliminating credit risks, this will significantly reduce the share of debt obligations.
Bank problems in China
With increasing problems, the banking system of China may affect other states. 2016 could be the moment of the beginning of another global crisis. Until now, stability has been maintained as a result of foreign funding. Now the situation has changed, so the vulnerability of the Chinese banking system is increasing. Also, since 2009, the danger of growing shadow financing has been growing. Many analysts compare the current state of banks with the state of the Japanese financial system in the 1980s.
The problem is that the insolvency credit bubble is accumulating. In conditions when the country has such a large money supply, production base and huge volumes of exports and imports, a certain level of highly liquid reserves should be ensured.
Speaking of what characterizes the banking system of China, we can briefly note: the structure of the banking system of the state includes two levels. The first is the central bank, the second - state and commercial banks. On the territory of the state, foreign banks and their branches are active. A feature of the Chinese banking system is that it is one of the most dynamic elements in the economy, as well as tight state control over banks.