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8.
industrial
Another
policy
notable
targets.
deficiency is that the Chinese
To
government does not seem to have any consciously maintained
monetary
One major reason for this situation is that the State Council, which is responsible for the overall management of the economy, tends to lay
more emphasis on the real side of the economy (GDP,
production, etc) than on the financial side. some extent it may also be due to the lack of an adequate institutional framework, such as well-established bond and
money markets together with the instruments, for implementing monetary policy. So, even up now, the role of PBOC is more akin to an exchequer for
government than to a central bank. In the absence of
firm monetary targets, regional banks generally possess great latitude in determining their own credit allocations, which may not be compatible with the targets and intentions
of the central government.
to
the
9.
also have
sector.
respective
losses.
the
financial
Inadequate reforms on other economic fronts can
bearing a
on the reforms in
financial
One notable example is the slow progress in the reform of state-owned enterprises, about a third of which
are reported as still suffering
This greatly
constrains PBOC's ability to raise interest rates and to
tighten credit as a move to curb the high domestic inflation, because the move will inevitably undermine the financial condition of those already ailing state-owned
enterprises.
Indeed, a substantial amount of loans
continues to be extended to such enterprises in order to
keep the business running and
unemployment.
to avoid massive
The huge state-owned sector and its
accompanying financial burden overshadow the efforts by the government to revamp the financial system.
in China are likewise
The stock markets are limited in size,
10.
The capital markets
under-developed.
short in history, restrictive in their mode of operation,
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