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China's Banking TransformationThe Untold Story$
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James Stent

Print publication date: 2017

Print ISBN-13: 9780190497033

Published to Oxford Scholarship Online: December 2016

DOI: 10.1093/acprof:oso/9780190497033.001.0001

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Collapsing or Adapting?

Collapsing or Adapting?

11 Collapsing or Adapting?
China's Banking Transformation

James Stent

Oxford University Press

This chapter examines an alternative view on the development of Chinese banking over the past fifteen years. In this view, the banking transformation initiated by Zhu Rongji stalled: Chinese banks today look modern, but they rest on fragile foundations and will encounter severe difficulties. A constant critical barrage from media and assorted pundits who lack understanding of how the Chinese system works lead to a negative consensus on Chinese banks. Chinese economy and its banks do face real issues and challenges: high debt levels, shadow banking, real estate overbuilding, local government debt, and the challenge of transitioning to the “New Normal.” In addition, the change in the banking industry poses new threats to banks: lack of private sector lending experience, disintermediation from development of non-bank alternative funding channels, and digital disintermediation.

Keywords:   negative consensus, debt, shadow banking, real estate, local government debt, new normal, disintermediation

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