Institutional Reforms and Development of Corporate Governance and Banking System in China

Abstract

The aim of this paper is to review China‟s institutional reforms and consequent development of Chinese corporate governance system and financial system. As part of the wider economic reform initiated since the late 1970s, the Chinese government has adopted various measures aimed at reforming state owned enterprises (SOEs). These mainly include managerial autonomy, a management responsibility system, corporatization and partial privatization of former SOEs. In addition, the Chinese government took various steps to enhance the efficiency of the banking sector. The analysis shows that China‟s efforts to improve the corporate sector through its own unique gradual and piecemeal approach has been successful in terms of introducing a formal governance structure for the corporate sector, liberalizing its financial sector, improving governance of state owned banks, and most importantly, developing the private sector as the back bone of the economy.