Enrich Series on Development Finance in China As a developing transitional economic entity, China is suffering under much constraint in its market system and infrastructure In recent years, the China Development Bank has explored a road of development finance, featuring Chinese characteristics that unite government goals and market mechanism In this three-volume series, the project research team set up jointly by the China Development Bank and Renmin University of China examines the theoretical framework and implementation process, typical cases and innovation in bond market of development finance in China Vol Development Finance in China: Theory and Implementation Vol Development Finance in China: Case Studies Vol Development Finance in China: Bond Market Innovation Published by Enrich Professional Publishing (S) Private Limited 16L, Enterprise Road, Singapore 627660 Website: www.enrichprofessional.com A Member of Enrich Culture Group Limited Hong Kong Head Office: 1/F., Lemmi Center, 50 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong, China Beijing Office: Rm 1108A, Culture Plaza, No 59 Zhongguancun St., Haidian District, Beijing, China English edition © 2011 by Enrich Professional Publishing (S) Private Limited Chinese original edition © 2006 China Renmin University Press Translated by Zhou Kai and Zhang Pengyun All rights reserved This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher ISBN (Hardback) 978-981-4298-10-0 ISBN (ebook) 978-981-4298-11-7 (pdf) 978-981-4298-50-6 (epub) 978-981-4298-91-9 (Kindle) This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service If legal advice or other expert assistance is required, the services of a competent professional person should be sought Enrich Professional Publishing is an independent globally minded publisher focusing on the economic and financial developments that have revolutionized new China We aim to serve the needs of advanced degree students, researchers, and business professionals who are looking for authoritative, accurate and engaging information on China Printed in Hong Kong Contents Foreword by Chen Yuan Preface vii xi Part I The Realistic Environment and Long-term Financing Plight How Was China’s Long-term Financing Plight Formed The Problem of the Existing Financial System 33 How to Escape the Long-term Financing Plight 73 Part II The Successful Practice of Development Finance in China The Formation and Development of China’s Development Finance The Operating Mechanism of Development Financial Institutions 131 China’s Development Finance Model: Micro Cases 159 97 Part III Theoretical Connotations of Development Finance Development Finance and Market Formation of Government-Led Finance 207 Development Finance and Social Capital Formation 251 New Developments in Financial Development Theories 269 Contents Part IV International Comparison of Policy Finance 10 Policy Finance in Europe and America 327 11 Policy Finance in Asia 351 12 International Development Financial Institutions 379 13 Policy Financial Mode: International Comparison and Trends 419 Notes 445 References 449 Index vi 459 Foreword At the turn of the century, the financial industry of China is faced with two major issues One is that the Asian financial crisis in 1997 raised a series of questions which need in-depth consideration; The other one is that China undertook to realize all-round opening up to the outside world after five years when it successfully joined the World Trade Organization (WTO) in 2001 Accordingly, we need to decide which path we will take and what countermeasures are needed to enable the financial industry of China to successfully deal with severe challenges and to fully seize this historic opportunity There are two choices for the financial industry of China One is to copy the complete set of practices of Western countries in financial industry management After all, they have one or two hundred years of history and technology and their financial strength is strong From London to Wall Street, there are countless financial stories The other one is to adopt the measure of introduction, digestion, absorption and re-innovation and to find a feasible way to enhance the finance of China and support sustainable development of China’s economy by constantly “looking into the mirror” in accordance with China’s national conditions and need of reform and development In practice, the China Development Bank (CDB) has chosen the latter We effectively combine the government’s organization and coordination advantages with the financing advantages of the CDB First, we successfully solved the difficult problem of low quality of the assets, accumulating a set of new methods of asset management with Chinese characteristics; and then we proposed the high target of building an “international first-class bank” from the perspective of the overall situation and world foresight, laying a solid foundation for successful restructuring from a policy bank into a development financial institution Subsequently, through “three credit reforms,” we have established an effective operating model for a development financial institution; in the difficult search for innovative development finance, we reformed and developed a complete set of rules, regulations and methods for China’s long-term financing market with the consensus and resultant force for building the market The development financial theories we have summed up through practice are theories based on national conditions, which have absorbed advanced principles of financial operations and are committed to the sustainable development of financial theory They come from practice and are Foreword used in practice to be tested in China’s economic development They may be extended to reform and development of other industries to achieve success from the reform and development of the financial industry In other words, they are China’s own theory Here, I would like to express my gratitude to the leaders and scholars from Renmin University of China Through their efforts Development Finance in China: Theory and Implementation , which systematically describes the successful development of China’s finance in the new period, has been completed I would like to thank all the friends at home and abroad whose concern and support have helped the growth and development of China’s development finance Although it is hard to include a great amount of the practice of thousands of employees from the CDB in Development Finance in China: Theory and Implementation with all efforts from different parties, it is an attempt to generalize and summarize the practice of development finance and another historical innovation in China’s economic and financial education I sincerely look forward to the fact that this book can provide the vast number of young scholars and the younger generation, who are going to be backbone of China’s financial industry for the next ten years, twenty years or longer, with knowledge and strength I sincerely look forward to the fact that China’s financial industry and our great motherland will be made stronger and more prosperous by the efforts of one generation after another Chen Yuan President of the China Development Bank viii References Liu Feng 劉峰, Wu Qiu-bei 武秋北 and Liu Jurong 劉菊蓉 2003 "Chongshu touzi zhuti geju jiminjian touzi zhuti de peiyu 重塑投資主體格局及民間投 資主體的培育 ("Pattern Reshaping of Investors and Cultivation of Private Investors, Reform of the Economic Structure") Jingji tizhi gaige 經濟體制 改革 (Reform on Economic System), Liu Lijuan 劉麗娟 2004 "Kaifang shichang zhong de jinrong 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NBER Working Paper (UCLA) 457 Index ADB (Asian Development Bank) 99, 3234, 380, 392-417, 431-2 ADF (Asian Development Fund) 394, 396, 410 adjustment loans 382-3, 391 administrative institution 179, 181-2, 184, 188 Agricultural Bank of China 14-16, 20, 47-8, 196 Agricultural Development Bank 19-22, 55, 58, 113, 127-8 Asia and Pacific region 323, 392, 398, 407 Asian financial crisis 28, 43, 99, 114, 117, 289, 294, 407, 410, 446 assessment system 180, 182, 184-5, 189 asset securitization 66-7 bad debts 16, 20, 28, 52-3, 371, 376, 388, 436 bank loans 7, 35, 50, 68-9, 365-7, 436 Bank of China 12-17, 28, 42-3, 47-8, 50, 52-4, 56-7, 106, 111, 113, 117, 120-1, 152, 154, 168, 174 banking crises 286-7, 289-90, 456 banking system 16, 27, 51, 79, 114, 173, 273, 277, 292, 409, 422, 438 banks central 12, 58, 105, 108-9, 113, 154, 288, 291, 298, 355, 364-6, 422-3 non-governmental 336, 342-4, 361, 374 Beijing 126, 149, 448-55 bond market 26, 60, 62-3, 120, 281 borrower country 386, 389, 391, 395-7 bottlenecks 2-3, 59, 78, 80, 89, 93, 104, 157, 164, 206, 229-30, 253, 258, 262, 265, 409 business model, high-policy single 324, 433-4, 442 capital, foreign 75, 194, 227, 274, 284, 288-9, 293 capital account 285, 289-90, 292-3 capital adequacy ratio 16, 18-19, 28, 48-9, 53, 111-12, 118-19, 127, 315 cash flow 121, 132, 138-40, 143, 152, 164, 198-9, 201, 203, 242, 274, 347 operational 169, 201-2 CDC (Caisse des Depots) 99, 332, 335, 339-40, 346 CEIB 19, 127-8 China Banking Regulatory Commission 17, 106, 108, 123, 168 China Construction Bank 14-17, 20, 28, 47-8, 53-4, 196, 198 China Development Bank 19, 59, 127-8, 448 China Yangtze Power Co 193-4, 199, 201, 445 choice, ultra-marginal 309, 311, 313 Chongqing 96, 149, 173-5, 185 co-financing 389, 398-9 Commercial Bank of China 14-16, 42, 47-8, 53-4, 196, 198 commercialization reform 11, 15-16, 18, 42, 52, 61, 68, 71 concessional loans 323, 331, 380, 396, 417 contributions 35, 168, 183, 199, 273, 276, 312, 374, 430 corner solutions 306-9, 312 countries, transitional 188, 190, 216 county government 175, 178-81, 183 credit, institutional 48, 92-3, 135, 137, 140, 414 credit assessment 122, 141, 144, 147, 178, 185-6 credit construction 101, 105, 121-2, 124, 132-4, 139-41, 144, 169, 171, 181, 198, 200-3, 240, 316 Index credit extensions, non-governmental 367-8 credit financing 66, 157, 243-4, 343, 438 credit grade 141, 183-4, 235, 248 credit guarantee 234, 330, 336-8, 342 credit markets 302, 304-5 credit structure 102, 105, 124, 134, 144-5, 163 credit system 79, 101, 105, 115-16, 132, 135, 141, 169, 200, 202, 292, 304 customer credit assessment 141, 147 Development Bank 115, 132-3, 147, 169, 178, 180, 245, 247-8, 266, 315-16, 323, 335, 353-4, 356-7, 360-2, 373 development bottleneck 77-80, 89-90, 318 development economics 381, 457 Development Finance and Market Formation of Government-Led Finance 207, 209, 211, 213, 215, 217, 219, 221, 223, 225, 227, 229, 231, 233, 235, 237 Development Finance and Social Capital Formation 251, 253, 255, 257, 259, 261, 263, 265, 267, 446 development finance incubation 103, 132, 137-40, 143, 168-71 development models 172, 295, 420, 439 development stages, economic 117, 229, 272, 352, 440 direct financing 12, 25, 66-7, 133, 196, 336, 447 direct investment 85, 173, 262, 265, 310, 335, 447 discounted cash flow method 154-5 East Asian development model 212, 226-7, 231, 293-6, 382, 445 economic reform, government-led 34, 74, 78-9, 84, 93 economic transition, government-led 23, 34, 38, 88 efficiency loss 24-6, 31, 69 EIB (European Investment Bank) 322, 328, 332, 335, 343-5, 349 endogenous 217, 278-81, 309, 446 460 enterprise loans, medium-sized 175, 17880, 182 environmental protection 80, 194, 382, 389, 408 equity investments 111, 335, 398, 410 exchange rate risks 150, 387-8, 396, 404 Export-Import Bank 195, 339, 353-4 Export-Import Bank of China (EIBC) 20, 55, 58, 113, 127-8 fair value 111, 154-5, 406 Federal Credit Program 328, 330, 348-9 finance, non-governmental 322, 328-30, 340, 346, 348, 421 financial constraints 282-3, 293, 295-9, 301-2, 305, 309, 446 financial crisis 17, 28-9, 51, 68, 282, 288-9, 295, 300-1, 304, 318, 382, 407, 435, 444 financial development theory 206, 270-3, 278-81, 283-4, 306, 309, 317-18, 446, 450-2 financial fragility 285-6, 450 financial instruments 154-5, 273-4, 300, 380, 383, 415, 436 financial intermediaries 85, 187, 272, 275, 280, 286-7 financial interrelations ratio (FIR) 272-3 financial markets 12, 24, 172, 187, 224, 227, 229, 231-2, 234, 239, 242, 274, 278-81, 284, 289, 299-300 financial regulation 270, 293, 297, 300-1, 305 financial repression 270, 273-5, 277, 282, 285, 293, 296-302, 305-6, 317, 446 financial risks 23, 71, 114, 117, 134, 404, 452 financial structure 41, 93, 239, 271-3, 451 financing coordinated 336, 341, 343-4 equity 25, 193-4 financing activities 85, 90, 199, 206, 208, 239, 244, 248 financing capacity 188, 245, 412, 415, 435, 440, 442 Index financing channels 12, 61, 75-6, 80, 134, 188, 194-5 fiscal investment 8, 50, 242-3, 245, 331, 352-3, 358, 362-4, 366-7, 378 fisheries 146, 353-4, 359-61, 393 forestry 146, 353-4, 359-61, 393, 408 four in one financing model 178, 182, 187-9 functional defects 62, 69, 92-3 goods, quasi-public 77 Gorges 96, 124, 190-1, 193-202, 234, 267 governance structure 85, 103, 132, 139, 169, 201-2 government, central 14, 28, 77, 117, 121, 230, 337-8, 340 government coordination 102, 136, 138-9, 201-2, 236, 240-1 government credit 85-6, 115, 136-7, 13940, 200, 239-42, 324-5, 352, 380, 414, 436, 443 government guarantee 68, 346, 395, 414 government intervention 83, 88, 115, 209, 214, 227, 230, 232, 276, 294, 297-8, 301, 303, 329, 381, 424 grants 105, 180, 184, 390, 394, 396, 413 grass-roots community 216 guarantee funds 175, 178-80, 182 guarantee institution 179-84, 188 guiding ideology 132-5, 381 heavy chemical industry 364, 366-7, 36971, 378 IBRD (International Bank for Reconstruction and Development) 380, 383-4, 386-7, 389-93 ICSID (International Centre for the Settlement of Investment Disputes) 380 IDA (International Development Association) 380-1, 385, 387, 389-90, 392-3 IFC (International Finance Corporation) 380, 382 indirect financing 12, 25, 31, 61, 80, 85, 322, 328, 333, 335-8, 341-5, 347, 447 industrial bases, old 121, 126, 144 industrial structure 2, 6, 79, 225, 229-30, 295, 370, 429, 438 industrialization 34-5, 219, 227-8, 233, 284, 407, 445, 455 inflation 29, 46-7, 272, 274, 277, 284, 288-9, 292-3, 296 information asymmetry 81, 90, 187-9, 225, 231-4, 236-7, 360, 414, 445 information costs 25, 36, 275, 444 information disclosure 363, 377-8 information spillover 231-2, 244, 247 infra-marginal analysis 306-8, 310-18, 446 infrastructure investment 7, 30, 35, 157, 234, 236-7, 246, 257, 412, 452 institution pull stage 84-5, 90, 112, 114 institutional arrangements 6, 34-5, 37-8, 61, 86-7 institutions, non-governmental 329, 331, 333, 346 interest rate controls 23, 274-5, 293-4, 297, 354, 384, 428 interest rate risk 111, 152, 387, 405 interest rates, real 275, 286, 296-7, 358 intermediaries 8, 281, 342, 346, 398 International Centre for the Settlement of Investment Disputes (ICSID) 380 international policy finance 321, 324-5, 420, 440, 442-3 investment dynamic 191-2 long-term 60, 98-9, 232, 245, 318 private 233-4, 238, 257, 334 investment banks 247, 281, 425, 441 investment system, government-led 34-5, 37, 40, 70-1 KDB (Korea Development Bank) 19, 99, 127-8, 324, 369, 431-2, 434-5, 439, 442 461 Index Kf W (Kreditanstalt für Wiederaufbau) 19, 99, 127-8, 324, 333-7, 339-41, 343, 431-2, 434-5, 439, 442 legal person construction 132, 138-9, 144, 169, 199-203, 240 legal person entity 199, 201 liberalization 212, 283-7, 291-3, 301-2, 446 liquidity portfolio, discretionary 405-6 listed companies 2, 62, 64-5, 70, 79, 139, 425 loan assessment 144-5, 155, 397, 445 loans hard 161-2, 387, 394, 396 soft 139, 161-2, 203, 387, 394, 396 long investment cycle 76-7, 91, 389 Long-term Financing Plight Formed 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27, 29, 31 macro-control 2, 6, 17-18, 20, 27, 85, 106, 113 marginal analysis 306-8, 318, 446 market countries, emerging 288-9, 300, 304-5 market credit 139, 200, 324, 380, 414 market cultivation 81, 84-6, 88, 208, 227, 230-1, 236, 242, 244-5, 252 market exit 103, 132, 137-8, 141, 143, 157, 169, 171, 189-90, 198, 200, 202, 248, 310, 315-16 market failure 81, 83, 98, 112, 133, 201-2, 215, 222, 224, 226-8, 294, 302-3, 310, 322, 341, 348 Market Formation 207-9, 211, 213, 215, 217, 219, 221, 223, 225, 227, 229-31, 233, 235, 237, 239, 247-9 market formation models 208, 215, 219 market performance 91-2, 100-2, 114, 116, 122, 137, 197, 241 market risk 25, 150, 231, 387, 404, 416 marketization 58, 74-8, 100, 133, 143, 197, 208, 212, 215, 218-21, 248, 282, 292, 382, 440, 446 McKinnon 23, 173, 273-6, 278, 282, 284-5, 290-3, 301, 317, 446, 455 462 McKinnon-Shaw School 276, 278, 281, 284, 293, 300, 302, 309 mechanism, development finance cooperation 105, 200-2 Medium-sized Enterprise Credit Information Collection and Assessment System 188-9 medium-sized enterprises 66, 69, 80, 129, 135, 141, 144, 172-5, 177-82, 184-90, 322, 333, 335-7, 341-6, 353-4, 373-4 Micro Cases 159, 161, 163, 165, 167, 169, 171, 173, 175, 177, 179, 181, 183, 185, 187, 189 Ministry of Finance 15-16, 48, 52-3, 55-7, 106, 353 Multilateral Investment Guarantee Agency (MIGA) 380 municipalities 77, 125, 160, 165-6 Murdock 295-7, 299, 446, 456 national debt 25, 29, 63, 66, 77, 102, 107, 201, 239-40 National Development and Reform Commission 168 non-governmental financial institutions 323, 330-1, 335-6, 338, 340-1, 346-7, 352-3, 355, 357, 360-1, 365, 373, 421, 447 non-governmental sector 228, 239, 296-7, 302, 330, 335-6, 421 non-performing assets 2, 14-17, 20-1, 28, 49, 53, 60-1, 68-9, 71, 79, 122, 146, 375, 421, 444 non-performing loan ratios 14-16, 21-2, 122, 127, 437 non-performing loans 13-16, 21, 51, 53, 68, 101, 111-12, 114-15, 118, 122, 127, 146, 183, 237, 315, 445 nongovernmental sector 303, 331, 338, 368 OCR (ordinary capital resources) 394, 396, 410 OMB (Office of Management and Budget) 342, 347-8 Index Operating Mechanism of Development Financial Institutions 131, 133, 135, 137, 139, 141, 143, 145, 147, 149, 151, 153, 155, 157, 445 Organization of the Petroleum Exporting Countries (OPEC) 288 organizational credit enhancement 96, 101-2, 105, 115, 125, 135-7, 139-42, 171, 266, 316 overhead capital, social 253, 255-6, 263, 265, 446 overlapping structure 6, 11-12, 27, 29, 31, 245 People's Bank 12-13, 42-3, 50, 52-3, 57, 106, 111, 113, 117, 120-1, 152, 154, 168, 174 per capita income 47-8, 219, 279 pillar industries 20, 30, 104, 106-7, 113, 117, 120-1, 124, 144, 157, 172, 195, 202, 247, 259 policy banks 11, 13, 18-22, 31, 55-61, 72, 86, 91, 113-15, 117, 127, 129, 194, 376-7, 432-6, 447 policy businesses 15, 18, 21, 54, 430, 434, 442 policy finance 99-101, 223-6, 317-18, 322-5, 328-9, 332-8, 340-3, 348-9, 352, 356-60, 364-5, 371-3, 376-8, 420-4, 426-32, 440-2 unsustainable 325, 420, 436, 442 policy loans 107, 124, 366-7, 370, 382, 391, 438 PPMS (Project Performance Management System) 401-2 private sectors 217, 277, 296, 382-3, 389, 394, 397-8, 410-12, 445 project construction 103, 126, 138, 195, 201, 240, 395 project development 144-5, 160-1, 170 project entrance 103, 132, 137-8, 169 project financing 76, 86, 92-3, 102, 105, 344, 395 public goods 57, 76-7, 80-1, 83, 88, 254, 302, 310 regional economic development gaps 229, 322, 328 resource allocation 6, 35, 39, 43, 78, 81-4, 87, 115, 208, 221-2, 227, 261, 283, 294-5, 322 risk filtering 236-7, 244, 246, 248 rural credit cooperatives 28, 39, 41-2 savings deposits 37, 40, 42, 45-7, 332 sectors, basic 206, 229, 235-6, 243-6, 256, 258 securities financing 67, 243-4 securities market 12, 24, 60, 242, 304-5, 424 short-board effect 6, 27, 29-31, 80-2, 92-3 Small and Medium-sized Enterprise 178, 435 social capital 75, 77, 172, 206, 238, 246, 249, 252-8, 262-7, 427, 429, 446, 453, 455-6 Social Capital Formation 251-3, 255, 257, 259, 261, 263, 265, 267, 446 social infrastructure 77, 255, 258, 409-11, 413 society, credit promotion 178-80, 182-3, 186, 188 State Council 16, 53-4, 98, 106-7, 168 state credit 92, 98, 101, 112, 114-15, 120, 135-6, 140 state intervention 82, 214, 221, 283 state-owned banking system 10, 14, 31, 38, 40-2, 48, 51, 66, 71-2, 80 state-owned banks 10-11, 13-18, 23-4, 27-8, 31, 37, 39-54, 61, 68-9, 71, 91-2, 188, 364, 422, 444, 453 state-owned enterprises 7, 9, 11, 13-14, 23-4, 27, 31, 35, 50, 61-5, 68-9, 91-2, 221-3, 242-3, 353, 422 Stiglitz 295-7, 299, 444, 446, 455-7 stock market 23, 26, 42, 60-1, 63, 65, 79, 199, 281, 299, 407, 425, 447 subsidies 22, 60, 68, 92, 101, 136, 142-3, 163, 225, 290, 311-12, 331-2, 334, 338, 346, 366-7 463 Index sustainable development 3, 21, 100-1, 104, 323, 330, 380, 383, 417 system defects 2, 24, 68, 74, 83-4, 98, 133 systems double-track 222 independent information investigation 104, 123 legal person 132, 169, 201-2 soft 212, 304, 309, 312 Technical Assistance Special Fund (TASF) 394 three-element 6, 11-12, 27, 29-31, 245 Tianjin 50, 96, 126, 149, 160-72 Tianjin Infrastructure Construction Investment 162, 166-7 Tianjin Municipal Government 160-1, 166-7, 171 transition countries 172, 217, 221, 306, 310 transparency 323, 344, 363, 378, 403-4 treasury 6-8, 28, 31, 35, 37, 50, 245, 292 urban infrastructure construction 160-4, 166-70, 172 vicious circle 6, 27-9, 31, 79, 218, 271 WB (World Bank) 19, 28-9, 36, 42, 98, 195, 255-8, 260, 294, 323-4, 380-4, 38691, 414-17, 421-2, 444-6, 452 Yang Xiaokai 306-8, 446-7, 453 464 [...]... and practical significance of development finance in the successful development of China at the turn of the century Part I, “The Realistic Environment and Long-term Financing Plight,” mainly states the background to the emergence, development and successful achievements of development finance in China Part II, “The Successful Practice of Development Finance in China, ” mainly discusses the operation... models of China s development finance Part III, “Theoretical Connotations of Development Finance, ” mainly discusses the contribution of the successful practice of China s development finance to theories of financial development in the new period Part IV, “International Comparisons of Policy Finance, ” xii Preface puts forward new patterns and paths of sustainable development for policybased finance after... Research Team on the Development Finance in China of the China Development Bank and Renmin University of China xiv xv Part I The Realistic Environment and Longterm Financing Plight After 20 years of reform and opening up, China s economic development has made great achievements, attracting worldwide attention Now China has entered the new stage of fully building a well-off society and speeding up the construction... Chapter 2 explains the reason why the existing financial system is helpless in coping with the long-term financing plight Chapter 3 tries to discuss financial options to escape the long-term financing plight 1 Chapter How Was China s Long-term Financing Plight Formed DEVELOPMENT FINANCE IN CHINA: THEORY AND IMPLEMENTATION The sustained and steady development of any country’s economy is inseparable from... assets, false bankruptcy or other forms of restructuring to achieve their goals of escaping, abolishing or suspending 13 DEVELOPMENT FINANCE IN CHINA: THEORY AND IMPLEMENTATION debts By 2000, 62,656 enterprises had opened accounts for restructuring in the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, the China Construction Bank and the Bank of Communications... of China s Financing System Capital market Bank Fiscal Indirect Financing and Long-term Financing Financing Plight of State-owned Commercial Banks Owing to the government’s control over finance, the state-owned banks are government offices rather than enterprises Accordingly they are able to separate the function of financial intermediation and the function of public administration The financial intermediation... food and clothing, maintained a rapid and smooth development of the economy and created the Chinese economic miracle attracting the world’s attention under the leadership of the Communist Party of China, there must be financial stories worth exploring and summarizing In August 2004, the topic-based group on “Study of China s Development Financial Theory System” consisting of the China Development Bank... relying on a single financing channel Moreover, in this three-element overlapping structure of financing, the funds raised from different sources are basically long-term funds The three-element overlapping structure of the financing is a special institutional arrangement for the transition period of China s economy 12 How Was China s Long-term Financing Plight Formed Fig 1.4 Three-element Overlapping... advanced in the future exploration of financial theory with richer and higher-level development finance practice The directors of the steering committee of the Research Team on the Development Finance in China are Chen Yuan, Secretary of the Party Committee and President of the CDB, Ji Baocheng, President of Renmin University of China and Huang Da, Honorary President of the China Society for Finance. .. toward the individual, the share of individual savings increased sharply, and the proportion of government revenue in national income continued to decline (as shown in Fig 1.2) In this situation, it was difficult for the state to relying only on fiscal funds to support economic growth In 1985 China adopted “government appropriations being replaced by loans,” which changed the finance- based” financing system