ABSTRACT
Barry Naughton and Nicholas Lardy are two academics who have written extensively about the economic reforms in China. Both present views which are clearly divergent and yet entirely plausible. Naughton (1995) sees the gradualist approach adopted by the Chinese authorities as a strategy for combating the massive bad debts and NPLs of the SOEs and state-owned banks while Lardy (1998) concentrates on financial reform and the development of a modern banking sector in China. His conclusions are clear. Disagreeing with Naughton, who argues that economic reforms arising from the natural growth of the non-state sector will cure the ills of the state-owned sector, Lardy insists that unless the current reform programme is speedily and thoroughly implemented, there is a serious danger of financial collapse of the banking sector and by implication the entire Chinese economy.
