A politico-economic analysis of financial reform in the economic transition of socialism: The case of mainland China
Date Issued
2001-07-31
Date
2001-07-31
Author(s)
DOI
892414H002031
Abstract
Financial institutions play different roles
in different economic systems. When a
socialist economy is making a transition to a
market economy, its financial system is
changing correspondingly. This means the
only way to understand the financial reform
of a transitional economy is through the
prism of the overall economic reform.
Financial reform not only reflects the overall
politico-economic environment, it also feeds
back on it. This research concentrates on the
financial reform in the Chinese mainland
from the late 1970’s to the late 1990’s, a
twenty years’ span. A politico-economic
approach is taken here. We start from the
changing political environment in mainland
China, through the overall economic reform,
to an understanding of the particular mode of
financial reform which is an integral part of
the mainland’s economic restructuring. We
also perceive the initiation of the following
stage of economic and financial reform in
light of the impact of the current stage of
economic and financial reform. Specifically,
we divide the two decades of reform into
three periods. The first period is from 1979 to
1983 when the agricultural reform that
dominated the reform agenda of the time
failed to bring about a corresponding
financial reform. In the financial sector, one
saw the emergence of the People’s Bank
from under the Financial Ministry to a
ministerial-level body directly responsible to
the State Council, and the restoration and
launching of specialized state banks. The
second period is from 1983 to 1993 when the
overall economic reform concentrated on
introducing market to a predominantly public
economy. During this decade, a
Western-style two-tier banking system was
installed, but the People’s Bank kept as its
primary goal financing growth of the
economy. Stability was not deemed the
paramount goal of the monetary policy, as is
the case in the West. A state commercial
banking system gradually took shape,
bringing about marketization, but not
privatization of the financial system. In view
of the rampant inflation and the resultant
social and political disturbances during this
decade, the third period began with the then
Deputy Premier Zhu Rongji heading the
People’s Bank and enshrining stability as its
paramount goal. In the Central Bank Law
issued in 1995, emphasis was made on the
People’s Bank’s independence of other
ministries and local governments. Towards
the end of the 20th century, the financial
system in the Chinese mainland has
progressed towards a Western style, two-tier
model. Market has become the dominant
allocator in the commercial banking sector,
and the co-existence of public and private
banks has become a significant phenomenon.
With that, however, the party-state’s grip on
the banking system remains tight, and the
People’s Bank can claim no independence of
the State Council or the Communist Party.
In sum, during the past two decades the
PRC’s financial reform has always been
embedded in the mainland’s overall
economic reform and the CCP’s high-level
factional politics. The financial reform
reflects the general political and economic
environment of the country and then impacts
on that environment.
Subjects
Mainland China
economic
reform
reform
financial reform
People’s Bank
market socialsm
Publisher
臺北市：國立臺灣大學政治學系暨研究所
Type
report
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