TNAG-2792-FCO40-4031-Relations-between-Hong-Kong-and-China-1993 — Page 96

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3.

Over the

past

real GDP has

one and a half decades, China's

been growing strongly, at an average annual

rate of 9%. This remarkable performance has come largely

from realisation of the productive potential unleashed from

the real sector of the economy. Development of the

financial sector, by comparison, is lagging far behind. Both the financial system and the institutional set-up

remain very much in a backward state, and can hardly meet

the requirements of a fast-growing and increasingly open

If not properly rectified and enhanced, this

could seriously constrain the growth potential of the economy in the longer term. Lately, in recognition of this significant drawback, the Chinese government has introduced number of measures with a view to revamping its financial system. However, some of these measures still fall short addressing the fundamental weaknesses, and more needs to

economy.

a

of

be done.

4.

This paper attempts to identify the main structural deficiencies of China's financial system against

its evolution since the late 1970s, and examine the various

measures designed for rectification and enhancement. It remark on the likely implications

concludes with a brief

for the Hong Kong economy.

Overview of main deficiencies in China's financial system

5.

One major deficiency of China's financial system

relates to the rather antiquated institutional set-up of

its banking system, which is inherited from the strictly

centrally planned economy in the pre-1978 years.

People's Bank of China (PBOC) is the central bank in China. But quite unlike the central banks in the advanced

economies such as the Federal Reserve in the United States

and the

monetary

The

in Germany, PBOC has only very few

Bundesbank

policy

tools

at its disposal.

Moreover, its

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