CONFIDENTIAL # 3
ARAMAN
9
monetary base.
Indeed, in many aspects of banking
operations the PBOC has to solicit advice from the BOC, the staff of which tend to be more knowledgeable in modern
banking and financial practices as a result of their
continuous contact with the outside world.
17.
Second, commercial banking remains largely
undeveloped in China, even though in recent years foreign banks have been allowed to set up branches or
representative offices in China. The CBOC is the only bank broadly resembling a commercial bank, with ownership shared among the state, the provincial authorities and individuals.
state-owned.
All the other specialised banks are
18.
Third, the general public tends to regard
institutions in the banking sector as government departments. This perception, together with China's relatively backward financial, payments and communications system, has resulted in consumer transactions being mostly
carried out in cash. Cheques and credit cards are rarely
used, and currency in circulation comprises around 20% to
25% of the total money supply in China. (For comparison, Hong Kong dollar notes and coins in circulation comprise
only around 8% of the total Hong Kong dollar money
supply.) Moreover, individuals' cash-to-deposit ratios
are very high. The cash-to-deposit ratios of enterprises are lower because they are required to deposit all of
their cash above a stipulated amount with the PBOC.
19.
With an under-developed banking and monetary system, further progress in economic reforms in China will be rendered difficult. If the Chinese economy is to
become more market-oriented and less subject to
CONFIDENTIAL # T
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