For the past few decades, the People's Bank of China has
exercised the functions and powers of a central bank, as well as
handling industrial and commercial credits and savings business; it
was neither the central bank in the true sense, nor a commercial
entity conforming to the law of the market economy. But since
reform and opening-up began in 1979, China has carried out a series
of significant reforms in its banking system, and strengthened its
opening to the outside world. Consequently, the finance industry
has made steady development. At the end of 2004, the balance of
domestic and foreign currency savings deposits stood at 25,318.8
billion yuan and the balance of home and foreign currency loans
came to 18,856.6 billion yuan. Now China has basically formed a
financial system under the regulation, control and supervision of
the central bank, with its state banks as the mainstay, featuring
the separation of policy-related finance and commercial finance,
the cooperation of various financial institutions with mutually
complementary functions.?
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In 1984, the People's Bank of China stopped handling credit and
savings business, and began formally to exercise central bank
functions and powers by conducting macro-control and supervision
over the nation's banking system. In 1994, the Industrial and
Commercial Bank of China, the Bank of China, the Agricultural Bank
of China and the China Construction Bank were transformed into
state-owned commercial banks; and three policy-related banks were
founded, namely, the Agricultural Development Bank of China, the
National? Development Bank and the China Import and Export
Bank. In 1995, the Commercial Bank Law was promulgated, creating
the conditions for forming the commercial bank system and
organizational structure, and providing a legal basis for changing
the specialized state banks to state-owned commercial banks. Since
1996, the financial organizational system has gradually been
perfected; the wholly state-owned commercial banks have been
transformed into modern financial enterprises handling currencies;
over 120 shareholding medium and small-sized commercial banks have
been set up or reorganized; and securities and insurance financial
institutions have been further standardized and developed. April
2003 saw the formal establishment of the China Banking Regulatory
Commission (CBRC). Since then, a financial regulatory system has
been formed in which CBRC, China Securities Regulatory Commission
(CSRC) and China Insurance Regulatory Commission (CIRC) work in
coordination, each body having its own clearly defined
responsibilities.??
In January 2004, the State Council decided that the Bank of China
and the China Construction Bank would start the experiment of
transforming the shareholding system. The main tasks are to
establish a standardized corporate governance and an internal
system of rights and responsibilities in accordance with the
requirements for modern commercial banks; to restructure the
financial system, speed up the disposal of non-performing assets
and to reinforce minimum capital requirement to build up
first-class modern financial enterprises. Now, six shareholding
commercial banks and urban commercial banks in China have begun to
accept overseas investors as shareholders.?