ABSTRACT
This chapter describes the state of banking reform and the banking system in China and analyzes the World Trade Organization (WTO) terms and their implications for the banking sector. It presents the experiences of transition and developing countries in banking liberalization and provides policy conclusions, with a view to incorporate lessons for China from other countries' experiences. The Government of China has implemented banking sector reforms aimed at replacing central government directed credit planning with a system wherein lending is based on commercial banking principles. These included institutional restructuring that separated central banking from commercial banking in 1984. Strengthening the domestic banking system through deepening market-oriented reforms becomes more urgent and gains vital importance as China readies to fulfill its WTO membership obligations. If China desires to keep its banking system under some degree of national control, it is vital that the domestic banking sector improve its financial health and strengthen the regulatory framework beforehand.
