Chinese banking sector

China's banking system has undergone significant changes in the last two decades: banks are now functioning more like western banks than before. Nevertheless, China's banking industry has remained in the government's hands even though banks have gained more autonomy. WTO has accepted China. The central bank of China is the People's Bank of China.

The "big four" state-owned commercial banks are the Bank of China, the China Construction Bank, the Industrial and Commercial Bank of China and the Agricultural Bank of China.

Chinese financial institutions were conducting all major banking functions, including the acceptance of deposits, the making of loans, issuing notes, money exchange, and long-distance remittance of money by the Song Dynasty (960-1279). In 1024, the first paper currency was issued by the state in Sichuan.[1] The two major types of indigenous Chinese financial institutions, piaohao (票號) and qianzhuang (錢莊), more often cooperated than competed in China's financial market.

Due to structural weaknesses of traditional Chinese law, Chinese financial institutions focused primarily on commercial banking based on close familial and personal relationships, and their working capital was primarily based on the float from short-term money transfers rather than long-term demand deposits. The modern concepts of consumer banking and fractional reserve banking never developed among traditional Chinese banks and were introduced to China by European bankers in the 19th century.

Piaohao[edit source] An early Chinese banking institution was called the piaohao, also known as Shanxi banks because they were owned primarily by natives of Shanxi. The first piaohao originated from the Xiyuecheng Dye Company of Pingyao.[2] To deal with the transfer of large amounts of cash from one branch to another, the company introduced drafts, cashable in the company's many branches around China. Although this new method was originally designed for business transactions within the Xiyuecheng Company, it became so popular that in 1823 the owner gave up the dye business altogether and reorganised the company as a special remittance firm, Rishengchang Piaohao. In the next thirty years, eleven piaohao were established in Shanxi province, in the counties of Qixian, Taigu, and Pingyao. By the end of the nineteenth century, thirty-two piaohao with 475 branches were in business covering most of China.[3]

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