ABSTRACT
After more than two decades of economic reform, China has been turned from a planned economy into a market economy. Non-state enterprises (NSEs) have become the main contributor to economic growth. The future vitality of the Chinese economy continues to lie in further expansion of NSEs and shrinking of state-owned enterprises (SOEs). However, NSEs still face many obstacles and handicaps in their expansion. In particular, there is a widely shared perception that NSEs have been constrained in their external finance because state banks have been preoccupied with supporting SOEs. Hence, it is necessary to carry out further financial reforms with a view to redirecting funds from SOEs to NSEs. Proposals range from curtailing loans to SOEs to setting up private banks.
