TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 209

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22.

Thirdly, although horizontal cooperation and

inter-bank lending and borrowing are encouraged under the

newly introduced policies, such activities between banks are not always compatible with the system of vertical

allocation of funds from the central authorities. So far,

there are still considerable restrictions from the higher

authorities on lending from one bank to another. Much

institutional inertia still remains, and this will have to

be overcome before the inter-bank market can serve to

provide liquidity to banks in China while they are still subject to central control.

23.

Fourthly, several structural defects in China's

economy have complicated the task of implementing more active monetary and financial policies. The major cres

are the distorted price structure (which undermines the

use of profits as a reliable guide to efficient lending),

the continued pervasiveness of mandatory planning (which

tends to place the non-planned sectors at a disadvantage), and weaknesses in the management and responsibility system as it applies to enterprises. This enables managers to pursue goals other than profit maximization for their own

benefit.

Activities of foreign banks in China

24.

The presence of foreign banks in China has grown out of all recognition in the past eight years. Since 1980, PBOC has approved 169 permanent representative offices and branches, involving over 80 foreign financial

institutions from 24 countries. Some 40 of the 50 largest

banks in the world have set up offices in China. Of the

169 representative offices and branches, 90 are in

Beijing, 21 in Shanghai, 18 in Guangzhou, 12 in Shenzhen, 17 in Dalian, 5 in Xiamen, 2 in Tianjin, 2 in Qingdao, ì

in Wuhan and 1 in Zhuhai.

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