China’s Emerging Financial Markets：Challenges and Opportunities

ISBN 978-0-387-93768-7 e-ISBN 978-0-387-93769-4
DOI 10.1007/978-0-387-93769-4
Springer New York Dordrecht Heidelberg London
Library of Congress Control Number: 2008942365
# 2009 by Milken Institute
All rights reserved. This work may not be translated or copied in whole or in part without the written
permission of the publisher (Springer ScienceþBusiness Media, LLC, 233 Spring Street, New York,
NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in
connection with any form of information storage and retrieval, electronic adaptation, computer
software, or by similar or dissimilar methodology now known or hereafter developed is forbidden.
The use in this publication of trade names, trademarks, service marks, and similar terms, even if they
are not identified as such, is not to be taken as an expression of opinion as to whether or not they are
subject to proprietary rights.
The Milken Institute has chosen the material published in this book series for its quality and seriousness
of purpose. But the opinions expressed in the books do not necessarily reflect the views of the Institute or
its staff.
Printed on acid-free paper
Springer is part of Springer Science+Business Media (www.springer.com)

Contents
Part I Overview of the Chinese Financial System
A Review of China’s Financial System and Initiatives for the Future . . . . . . 3
Franklin Allen, Jun ‘‘QJ’’ Qian, Meijun Qian, and Mengxin Zhao
The Transformation of China from an Emerging Economy to a Global
Powerhouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
James R. Barth, Gerard Caprio Jr., and Triphon Phumiwasana
China’s Financial Sector: Contributions to Growth and Downside
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Albert Keidel
Part II Monetary Policy and the Foreign Exchange Market
Monetary Policy Implementation in China: Past, Present,
and Prospects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Bernard J. Laurens and Rodolfo Maino
The China Monetary Policy Handbook . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Jonathan Anderson
The RMB Debate and International Influences on China’s Money
and Financial Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
Priscilla Liang, Alice Ouyang, and Thomas D. Willett
The United States–China Currency Dispute: Is a Rise in the Yuan
Necessary, Inevitable, or Desirable?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
John A. Tatom
New Estimation of the Renminbi Regime. . . . . . . . . . . . . . . . . . . . . . . . . . 313
Jeffrey A. Frankel
xiii
The Chinese Imbalance in Capital Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 331
John A. Tatom
Some Issues Regarding China’s Foreign Reserves . . . . . . . . . . . . . . . . . . . 349
Jie Li, Jing Chen, and Liqing Zhang
Part III The Banking System
Institutional Development, Ownership Structure, and Business Strategies:
A New Era in the Chinese Banking Industry . . . . . . . . . . . . . . . . . . . . . . . 369
Allen N. Berger, Iftekhar Hasan, and Mingming Zhou
China’s Nonperforming Loans: A $540 Billion Problem Unsolved . . . . . . . 403
Tong Li
The Evolution of Bank Lending Patterns in China: A Post-1994
Province-By-Province Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423
Richard C.K. Burdekin and Ran Tao
Determinants of Location Choice of Foreign Banks Within China:
Evidence from Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449
Chung-Hua Shen, Qi Liang, and Xiang-Chao Hao
Financial Institutions’ Lending and Real Estate Property Prices
in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
Perry Wong and Diehang Zheng
Combating Financial Exclusion in China: A Banking Regulatory
Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
Yufeng Gong and Zhongfei Zhou
Part IV The Bond and Equity Market
The Chinese Bond Market: Historical Lessons, Present Challenges,
and Future Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523
Haizhou Huang and Ning Zhu
An Update on China’s Capital Markets: Focus on China’s Securities
Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547
Chung-Hsing Chen
Privatization in China: Experiences and Lessons . . . . . . . . . . . . . . . . . . . . 581
Jie Gan
xiv Contents
The Emergence of Shareholder Protection in China. . . . . . . . . . . . . . . . . . 593
Chen Lin, Clement Chun-Yau Shum, and Sonia Man-Lai Wong
An Appraisal of the Impacts of Non-tradable Shares Reform
on Large Shareholders’ Behavioral Modes of Listed Companies
in the A-Share Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617
Honghui Cao and Huazhao Liu
Will China Surpass the United States?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 635
John A. Tatom
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641