chapter  4
31 Pages

The formation of “extractive” financial systems

ByChangwen Zhao, Hongming Zhu

Chapter 4 Discusses how China’s financial system degenerated to become extractive. The main factor was the financial restraint policy. Its three main elements were interest margin protection, restrictions on financial industry access and asset substitution. Improper financial regulation, unbalanced financial structure, poor accounting for financial services and too slow transformation and upgrading of the real economy also contributed to the development of the extractive financial system.