MAJOR FINDINGS The major ﬁndings of this research can be summarized according to two central themes. First, when viewed in a historical perspective, the Chinese ﬁnancial sector has experienced substantial reform since the transition to a market economy began in 1978. Particularly prominent in this liberalization has been vast institutional diversiﬁcation. Prior to 1978, China’s ﬁnancial system consisted almost exclusively of a state-owned, mono-banking system. Early in the reform period this system was replaced with a two-tiered banking structure, with the PBC installed as the central bank and other SOBs performing a mix of development and commercial banking functions. Banks of various other ownership classiﬁcations have also joined the SOBs. In addition to banking system institutional diversiﬁcation, numerous NBFIs have emerged including UCCs, TICs, the postal savings network, ﬁnance companies, insurance companies, leasing companies and securities companies. Direct capital markets for both equity and debt are also now part of the modern Chinese ﬁnancial system. Another prominent aspect of ﬁnancial sector reform has been that government controls over ﬁnancial institutions have been relaxed. Prior to the transition to a market economy, ﬁnancial institutions were directly controlled by the central government, interest rates were ﬁxed at low levels, and the volume and direction of credit was decreed in a detailed manner by the credit plan. However, during the reform period, a ﬂoating interest rate system has been introduced, which has given ﬁnancial institutions varying degrees of autonomy to set their own interest rates within a speciﬁed band...
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