ABSTRACT
This chapter discusses Chinese economic reforms in general, while those that follow will outline the main financial reforms and review the progress of their implementation. The shift from production to consumption as the goal of economic activity has had an important effect on economic policies. Economic criteria and administrative regulations were to govern bank decisions on credit and other important matters, as opposed to orders emanating from local government and Party cadres outside the banking system. "Economic levers" such as interest rates and repayment terms should partially supplant directives in guiding the actions of enterprises. Loan agreements should be formalized in economic contracts between bank branches and enterprises. The concerns of economic readjustment came to affect the banking system more and more strongly as 1980 progressed. Trust organizations and departments are true financial intermediaries that mobilize and concentrate scattered financial savings, directing them to investments that foster local economic development.
