Introduction

In the depths of the Asian Financial Crisis few people could have imagined the tremendous transformation that would take place in the financial systems in China and the West in the following two decades. The Asian Financial Crisis starkly revealed the weakness of China’s financial institutions, including giant state-owned banks, local financial firms and non-bank financial institutions operating outside China. The crisis provided a vivid demonstration of the potentially unstable nature of the international financial system and the damage that instability could cause to China. ‘Cutting the trees to save the forest’ provided a breathing space for the whole Chinese financial system to undertake comprehensive reform. The Global Financial Crisis provided an even greater shock to China’s policy-makers. The way in which the Chinese and the West’s financial system interact with each other constitutes a central issue in global political economy in the years ahead.