The Chinese banking sector is one crucial factor of the countrys transition towards a market economy. Financial intermediation - the channelling of bank deposits into investment projects - is one of its main tasks. Economic theory finds that without a hard budget constraint for banks the efficient monitoring of credit users implementing such investments is not assured. In China, however, the legacy of socialist directed lending practices still impacts the risk taking of financial intermediaries. Major banks expect government to bail them out in case of financial failure. Such bail-out...
The Chinese banking sector is one crucial factor of the countrys transition towards a market economy. Financial intermediation - the channelling of ba...