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    Tracing The Journey of People'S Republic of China: "Let China Sleep When She Wakes She Will Shake The World." Napoleon

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    Prachi Jain
    The document traces the evolution of China's banking system from 1978 to present. It started as a monobank system controlled by the central bank and then transitioned to a system with four large state-owned commercial banks. Policy banks were later established to handle policy lending. China has faced challenges from shadow banking and now regulates shadow banking more strictly. China's capital markets have also opened up in recent decades as it integrates more with the global economy.

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    © All Rights Reserved
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    Tracing The Journey of People'S Republic of China: "Let China Sleep When She Wakes She Will Shake The World." Napoleon

    Uploaded by

    Prachi Jain
    25 views45 pages
    The document traces the evolution of China's banking system from 1978 to present. It started as a monobank system controlled by the central bank and then transitioned to a system with four large state-owned commercial banks. Policy banks were later established to handle policy lending. China has faced challenges from shadow banking and now regulates shadow banking more strictly. China's capital markets have also opened up in recent decades as it integrates more with the global economy.

    Original Description:

    overlook of the Chinese Financial System

    Original Title

    China Final

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    The document traces the evolution of China's banking system from 1978 to present. It started as a monobank system controlled by the central bank and then transitioned to a system with four large state-owned commercial banks. Policy banks were later established to handle policy lending. China has faced challenges from shadow banking and now regulates shadow banking more strictly. China's capital markets have also opened up in recent decades as it integrates more with the global economy.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    25 views45 pages

    Tracing The Journey of People'S Republic of China: "Let China Sleep When She Wakes She Will Shake The World." Napoleon

    Uploaded by

    Prachi Jain
    The document traces the evolution of China's banking system from 1978 to present. It started as a monobank system controlled by the central bank and then transitioned to a system with four large state-owned commercial banks. Policy banks were later established to handle policy lending. China has faced challenges from shadow banking and now regulates shadow banking more strictly. China's capital markets have also opened up in recent decades as it integrates more with the global economy.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 45

    Tracing the

    journey of
    PEOPLE’S
    REPUBLIC OF
    CHINA

    “Let China sleep; when she wakes


    she will shake the world.”
    NAPOLEON
    CHINA’S
    BANKING
    SYSTEM

    BANKING IN THE SHADOWS


    BANKING SYSTEM

    March,2017
    Year Structure of banking
    EVOLUTION
    1978 Fully centralized monobank system with the People’s Bank of China OF BANKING
    Commercial banking responsibilities devolved to: IN CHINA
    1. Agricultural Bank of China (ABC),
    2. Bank of China (BOC),
    1979
    3. China Construction Bank (CCB), and
    4. Industrial and Commercial Bank of China (ICBC).

    Policy banks were established to take over the remaining policy lending
    responsibilities –
    1. China Development Bank
    1994
    2. China Agricultural Development Bank
    3. China Export and Import Bank

    2001 After China’s accession to WTO, entry of foreign banks was also allowed
    Share of Selected Bank Groups in China in the Total Balance in 2014
    CHINA’S
    SHADOW
    BANKING
    PROBLEM

    SHADOW BANK LOANS MAKE UPTO 57%


    OF ALL BANK LOANS IN CHINA.
    (2016 CLSA REPORT)
    RISE OF THE SHADOW BANKING

    Demand for
    Fiscal Stimulus to
    borrowing got so Markets grew so
    recover from GFC
    high ; banks big that other
    in 2008-09 by
    started packaging companies too
    having banks lend
    loans and selling joined.
    more money.
    to investors
    Prominent shadow banking tools
     If China slumps, there's no one left to
    keep the global economy from
    stagnating.

     Mismanagement of China's economy will


    inevitably mean overcapacity; killing
    domestic industries in other countries.
    MEASURES TO CURTAIL A new set of rules was then
    implemented late in the year
    2017-:

    Strict definitions of products under


    the umbrella of “asset-
    management products”.

    Regulations that limit the number


    of commercial banks in which
    each investor can own holdings.

    Punish banks that use their own


    capital to provide guaranteed
    coverage on investments in
    wealth-management products.
    CHINA’S
    CAPITAL
    MARKET

    The second largest in the world


    Increasing connectivity

    Enlarged QFII and RQFII quotas

    Easier Cross trading between Hong Kong, Shanghai


    and Shenzhen stock markets

    Simplified channels to enter the CIBM


    Stock Market
    OPENING UP OF STOCK MARKET MAJOR EXCHANGES

    Shanghai Stock Exchange-


    1982-actively promoted the Joint-stock
    World's 4th Largest stock market
    reforms.

    In the early stage, most stocks had bond-like.


    Shenzhen Stock Exchange-
    Over time, the shares issued to the public took 8th Largest stock exchange in the world
    on a form similar to modern common stocks.
    SIZE OF STOCK MARKET (1990-2016)
    Bond Market
    CHINA’S
    BALANCE OF
    PAYMENTS
    Balance of Payment: China 2017
    PARTICULARS AMOUNT (USD MILLION)
    CURRENT ACCOUNT 1,64,886.6
    Balance of Trade 476145.7
    Balance of Services (265417.3)
    Balance on goods and services 210,728.4
    Unilateral transfers (45,841.8)
    CAPITAL ACCOUNT (93.6)
    FINANCIAL ACCOUNT (57,096.2)
    DIRECT INVESTMENT (66,309.5)
    PORTFOLIO INVESTMENT (7,431.3)
    OTHER INVESTMENT 16,644.6

    BALANCE ON CURRENT, CAPITAL AND FINANCIAL ACCOUNTS 1,07,696.8


    NET ERRORS AND OMISSIONS (16,170.6)
    RESERVE POSITION 91526.2
    Src:IMF financial statistics yearbook
    CHINA’S SERVICE TRADE 2000-2016
    500000

    400000

    300000

    200000
    USD MILLION

    100000

    0
    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
    -100000

    -200000

    -300000 YEARS
    Src: knoema.com
    EXPORT IMPORT BALANCE

    • Financial Services and Investment • Education


    • Information and communication technology • Insurance and pension service
    • Travel • Intellectual property
    CURRENT ACCOUNT
    BALANCE

    GFC-2008

    2001:WTO FOLLOWED BY DEFICIT


    MEMBERSHIP IN 2018

    Src: knoema.com
    Net Financial Account
    2008- Global
    Financial Crises

    2015-market
    determined Yuan

    2002- loosening up of
    capital market

    Src: knoema.com
    FALLING
    GROWTH RATE

    Src: knoema.com
    • SWF of China
    • Funded in 2007 with $200
    billion of registered capital.
    ABOUT
    • 2nd Largest SWF.
    • Scaled 8 on 10 on
    CHINESE Transparency Index
    INVESTMENT
    CORPORATION,
    2007 • CIC International co.
    CIC’S • CIC Capital Corporation
    SUBSIDIARIES • Central Huijin
    Investment Ltd.
    Strategic Interest
    in Africa
    Overcome the
    declining Chinese
    Growth potential.

    Regain its Low Cost


    Labour advantage.

    Affect worldwide
    politics.
    US-CHINA TRADE
    WAR
    China’s Major Trading Partners
    US –CHINA TRADE WAR- JULY 6,2018
    Causes
    China’s unfair competition strategy
    Effort to hault China’s rapid technological rise.
    Story so far
    US has already slapped tariffs on US$250 billion worth of Chinese products
    China has set tariffs on US$110 billion worth of US goods

    2018: Chinas growth rate declined to slowest in 30 years @6.6%


    Impact Stock market of both the countries on the rocks
    Exchange Rate Regime
    RMB-USD daily Onshore/Offshore exchange rates
    China agrees to
    revalue Yuan

    Peg to USD
    @ 8.28

    China relaxed its


    peg

    18 year high in 2014


    INTERNATIONALISATION OF RENMINBI
    The US Financial Crises. 1. CHIANG MAI INITIATIVE

    Inflation and asset price bubbles


    in china due to loose monetary 2. The DIMSUM bonds
    policy of the US.

    Bigger role in the International 3. Encourage traders to trade in


    political economy. RMB
    INTERNATIONALISATION OF RENMINBI

    RMB has
    Republic of South Korea penetrated BOC has
    Mongolia- 60% accepts through the started to
    of cash in local Redback in streets of Laos, provide cash
    circulation in its shops and Myanmar, in RMB in
    Hongbi restaurants Cambodia and the west.
    Nepal

    All these initiatives have helped rmb acquire its deserved position as a
    currency in the SDR in 2016, which is brought a greater status to China.
    Major Long-Term Challenges Facing the
    Chinese Economy
    Middle income trap

    Large Internal Imbalances of Savings, Fixed Investment, and


    Consumption

    Demographic Challenge
    Middle Income Trap
    Imbalances of Savings, Fixed Investment, and Consumption
    Imbalances of Savings, Fixed Investment, and Consumption
    Imbalances of Savings, Fixed Investment, and Consumption
    DEMOGRAPHIC CHALLENGE
    Made in China 2025
    • Threat to high tech exporting
    countries.
    Why is the world nervous? • Intent on subsuming the entire
    Quotas for Hi-tech global supply chain
    sufficiency

    • Pushing domestic companies to


    engage in foreign acquisitions
    • Pressuring foreign companies to
    Market transfer IP
    asymmetry
    $ 8 trillion
    investment
    initiative
    Belt and Road Initiative of China: The Real Motives
    Huge boost in
    Chinese industries
    suffering with
    overcapacity.

    Greater
    international
    stature for
    Renminbi

    Undue influence
    on countries by
    creating a debt
    trap
    Asian Infrastructure Investment Bank (AIIB)

    – established on December 25, 2015


    – The Bank has 57 founding members
    MOTIVES
    Grievance with existing MDBs
    Funding mechanism for OBOR
    Political strength
    AIIB
    MEMBERSHIP
    56 founding members
    86 approved members from six continents- May,2018
    Non sovereign entities also allowed
    BOARD
    China is largest shareholder
    Non resident board
    THANKYOU
    SPECIAL THANKS TO THE REVIEWERS-
    1. FALAK GUPTA
    2. JYOTI PANDEY

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