ABSTRACT

This chapter looks at the future prospects for financial reforms in China and speculate on the likely direction that reforms will take. Institutional reforms in China's financial system have focused on strengthening the independence of the banking system, more clearly separating its role and functions from those of the fiscal system, and restoring and establishing various specialized financial institutions. The main remaining problem is the low interest rates on enterprise deposits and the limited menu of financial assets firms can buy. Fiscal decentralization almost certainly has increased the discretionary financial resources available to provincial governments. The most important measures have been the decentralization of the credit management system and the establishment of domestic trust and investment organizations. Despite undoubted benefits in many cases, decentralization in the absence of certain complementary measures may prove to be more harmful than beneficial. The chapter also presents some closing thoughts on the key concepts discussed in the preceding chapters of this book.