It has been announced that China will create up to five privately financed banks this year in an attempt to boost the sector and increase competition. The idea is to gradually open up the market in order to provide a platform for more robust growth for the overall economy.
At first, the new institutions will operate on a trial basis, supervised by Chinese banking authorities, though they will be entirely funded through private enterprise. The idea is to either restructure existing banks as well as to create new ones, capable of “bearing their own risks”, the China Banking Regulatory Commission (CBRC) told Xinhua, the state-owned news agency.
The move is another attempt by Chinese leaders to boost competition in the economy without relinquishing overall control of the markets
The new move is part of an effort by CBRC to ease to flow of foreign capital into the Chinese banking sector. According to Xinhua, the regulator will also be investigating the possibility of lowering the threshold required for foreign banks to enter the country.
The move is another attempt by Chinese leaders to boost competition in the economy without relinquishing overall control of the markets. It is a direct result of the lower growth rates experienced over the past two years, after decades of uninhibited growth, which called into question China’s overreliance on foreign trade. Last year the overall economy grew only 7.5 percent, the lowest rate for two decades.