International financial system has always been a debatable and crucial focus of the world discussion and it is mainly due to the repression of the economies especially after the current financial crisis. People would start to worry and challenge the current financial system, in this case in China, Chinese people argue against the current financial system such as the International Financial System and the IMF as well. They mainly question about the problems that exist in the international financial regulatory system. As the economic and monetary institutions vary from place to place and there is no standard set of rules for these institutions and therefore it would show some systematic importance of the framework of the main international monetary relations.
In China, there has been a very high saving rate and a very high economic growth; therefore it may drive attentions from the deficiencies of the current Chinese financial system in which it may be acknowledged. High economic growth should critically rely on the sustainable development and suitable reform in the financial system. But there are still a lot of miseries in the Chinese financial system after digging into several academic papers of the Chinese financial system and there are lots of issues that are unsettled and unexplained such as the flows of the non-performing loans, etc. And these remain a debatable issue for the last few years. As the Chinese economy has been growing so fast, we might overlook some of the inefficiency of the financial sector which might due to the financial system itself and we can then classify and distinguish the positive or the negative of such inefficiency of the financial system that could possibly bring.
China has common features when comparing to other East Asian countries such as Indonesia and Laos in terms of the features of financial system and which may have a sense of complacency of what financial system that they have. And this kind of complacency might lead to a underestimate risk and potential failure of financial instability and therefore when the risks are not fully recognized, it might result in a severe failure of the financial system.
Chinese Banking system has shared a very percentage of GDP of China and this is a very general pattern which could also be seen in the rest of the world. This bank-dominated finance pattern might threaten the stability of the financial system and sometimes, it might create "too big to fail" theory and this have had happened in the USA and the banks in China is getting too big and have the risk of the "too big to fail" problem. And the fixed income security in China is still immature and it is relatively thin and volatile to some extend. And therefore there should be some sort of reform in terms of the financial system that China with such enormous economic growth should also bear and solve its shortcomings.
And this paper is going to measure the effects after the Chinese Financial system reform and therefore for the first part of this paper, it would examine the likely advantages and the disadvantages of the Chinese financial system reform with the basic trends of change. And secondly, I would look into the banking system as well as the stock market in China and would examine the effects of the financial system reform on the banking and the financial system by comparing the before and after. And lastly, this paper would examine whether there is a significant and substantial progress after the financial system reform by comparing the initiatives of the financial system reform and the current conditions.