ABSTRACT
China’s banking industry is facing even more prominent challenges. The largely state-monopolized banks are severely handicapped with non-performing loans. The existing large volume of non-performing loans already presents a daunting task for banks to remain solvent, let alone to have room for further changes and development. Also, China’s growing market economy increasingly demands more effective and efficient financial services. The degree of financial development signifies the sophistication of a market economy. China’s backwardness in its banking operations will likely hinder the further development of its market economy, if not destabilize the financial and economic systems. In addition, China’s membership of the World Trade Organization (WTO) entails opening up its financial sector to foreign competition. In the face of fierce competition from global financial conglomerates, China’s situation will likely place it in a vulnerable position. The gain from manufacturing industry is likely to be compromised by its ill-functioning financial industry.
