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Article

Wei Ping He

The purpose of this paper is to provide an overview of China's contemporary banking regulatory system, with particular focus on regulatory control of foreign banks trading…

Abstract

Purpose

The purpose of this paper is to provide an overview of China's contemporary banking regulatory system, with particular focus on regulatory control of foreign banks trading in China. The paper addresses three aspects of Chinese banking regulation: what does China regulate; why does China regulate; and how does China regulate. Much of the discussion is concerned with China's regulatory agencies particularly with the role of the CBRC as the principal regulator in China's banking sector.

Design/methodology/approach

In the first instance the paper presents an overview of banking regulatory models gained from a review of theoretical literature in the area. Then through a wide ranging review of Chinese publications, both academic and official, the paper seeks to relate the course of regulatory reform in China, both in terms of compliance with orthodox regulatory theory, and the unique regulatory requirements of the Chinese banking system.

Findings

The paper recognises that China has embraced the need for banking regulation with the establishment of an institutional structure that is responsive to both banking supervision and government policy. Within that structure the role of the CBRC, the pervasive manner in which that agency operates, and the content of its regulatory output have been identified and critically reviewed.

Originality/value

In its review of the modernization of China's banking regulatory system, the paper achieves originality from the author's research into, and critical reflections on Chinese generated literature, both institutional and academic, which is then communicated in a manner that will be understood by readers familiar with Western banking regulatory theory.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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Article

Shi Hu

By drawing on leader–member exchange theory, this study aims to understand the relationship between job autonomy, transformational leadership and psychological well-being…

Abstract

Purpose

By drawing on leader–member exchange theory, this study aims to understand the relationship between job autonomy, transformational leadership and psychological well-being mediated by job satisfaction among front-line employees in Chinese commercial banks.

Design/methodology/approach

A cross-sectional study which consists of 96 respondents from 5 Chinese commercial banks is conducted.

Findings

Through data analysis, the results reveal that transformational leadership and job autonomy are significantly positively related to job satisfaction and directly related to the psychological well-being of front-line employees in Chinese commercial banks. Another interesting finding is that there is a mean difference between male and female front-line employees in Chinese commercial banks on the preference of job autonomy and transformational leadership.

Originality/value

The current study offers further evidence for which strategies Chinese commercial banks should adopt to enhance and protect the rights of front-line employees’ psychological well-being. As front-line employees in commercial banks play a vital role in contributing to bank profits and operational efficiency. They are not only the employees for making profits but also have the right to experience the psychological well-being as a human. Employees with a high level of job satisfaction and psychological well-being benefit both their own health and organizational performance in the long run.

Details

International Journal of Human Rights in Healthcare, vol. 14 no. 1
Type: Research Article
ISSN: 2056-4902

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Article

Rachita Gulati

This study aims to demystify how the critical regulations affecting the bank competition have instituted, amended and fine-tuned over the years in India and its peers in

Abstract

Purpose

This study aims to demystify how the critical regulations affecting the bank competition have instituted, amended and fine-tuned over the years in India and its peers in Brazil, Russia, India, China and South Africa (BRICS). The gaps in the regulatory practices influencing bank contestability and competition in BRICS nations are identified. Also, the regulatory convergence is tested by comparing the policies embraced in India vis-à-vis its peer nations.

Design/methodology/approach

A methodological framework by Barth, Caprio and Levine (2013) is adopted to construct various regulatory indices. The empirical analysis is based on information available in five rounds of the bank regulation and supervision survey conducted in 2000, 2003, 2007, 2011 and 2017 by the World Bank.

Findings

The empirical findings elucidate that although bank entry regulations have been liberalized over time, the bank contestability seems to be low in the BRICS countries, especially in India. This might be due to the substantial government ownership and the presence of notional powers that are conferred to bank supervisors. On comparing the bank regulations in India vis-à-vis its peers, the author find a strong convergence in licensing requirements for entry into the banking business, foreign bank entry mode, restrictions on conglomerate formation and adoption of prompt corrective action framework.

Practical implications

The study suggests that future policy initiatives in India need to focus on redesigning the banking structure by reducing the share of state ownership, permitting joint ventures and liberally allowing the entry of new domestic and foreign banks in the industry. In the years to come, regulators in India will continuously face the challenge of fostering bank contestability without jeopardizing bank efficiency and overall stability.

Originality/value

This study is perhaps first of its kind, which analyzes the inter-temporal changes in regulatory indicators to examine the variations in the competitive environment of the banking markets of BRICS economies in general and India in particular.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

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Article

Lei Xu, Shih-Cheng Lee and Yishu Fu

– The purpose of this paper is to examine the impacts of capital regulation and market discipline when China imposed most of the Basel I requirements between 2004 and 2010.

Abstract

Purpose

The purpose of this paper is to examine the impacts of capital regulation and market discipline when China imposed most of the Basel I requirements between 2004 and 2010.

Design/methodology/approach

Following Barrios and Blanco (2003) and Rime (2001), the authors apply disequilibrium and simultaneous measurements to identify the financial safety net underlying capital movements as well as the changes in credit risk levels in China’s banking sector.

Findings

The authors discover that capital regulation outweighs market discipline by an average probability of 0.65-0.35 in the contribution to bank capital movements when banks significantly improve their capital buffers. In addition, the banking sector lowered its risk levels in the sample period.

Research limitations/implications

The findings suggest that the largest bank-based economy has consolidated its financial system for future expansion.

Originality/value

China’s banking sector requires closer examination of capital and risks provided by its emerging significance in the financial world. Thus, this study contributes to current literature.

Details

International Journal of Managerial Finance, vol. 11 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

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Article

Lan Jiang

Following China entered the World Trade Organisation in November 2001, attention has been paid worldwide to the current Chinese legal system, political policies, and the…

Abstract

Following China entered the World Trade Organisation in November 2001, attention has been paid worldwide to the current Chinese legal system, political policies, and the development of economic reform. Recent debates on corporate governance in China have become a global topic of interest. The corporate governance reform is now the centre of the enterprise reform. This paper evaluates the development of corporate governance reform in China and identifies its changes in legislation on corporate control. This paper provides evidence to show that China has been making significant progress in the development of corporate governance reform. It concludes that China has established a fundamental legal framework for corporate governance. The changes in regulations on corporate control indicate that the development of a more sophisticated corporate governance system is under way. However, corporate governance reform in China is still at an early stage of development. The existing problems are still significant. Laws and legal institutions have experienced difficulties keeping up with the changes that have been taking place in China. The rights of selecting management of state‐owned enterprise still remain in the hands of the state. The reform of the banking system lags behind the development of the market economy and state‐owned banks are still under government's control. The paper argues that in Chinese context as far as the rights of selecting management remain in state's hand, the independent board of directors will have less power to achieve the goals in corporate control. Thus the agency problems will not be solved, and it is very difficult to excise and protect minority shareholders' interest. In today's Chinese market the corporate governance cannot provide the protection of minority investors' interests. This paper also argues that it is very dangerous for individual investors to invest in the Chinese market and they have to bear higher risks. This paper suggests that increasing the Sophistication of the corporate governance system of both internal and external control is the key for the Chinese market. This is because the Chinese context is very complicated. There are so many regulations and laws applied in business practice. Different companies and enterprises apply different laws. This paper points out when a national corporate governance system is established it should serve the whole economic market. Thus the further reform of state‐owned enterprises and also the banking system should take place so that China can build up a real economic market structure according to international regulations. This paper also suggests that in the long‐term, building up a cultural background for applying corporate governance system is very important in Chinese society. Improving the culture in the social environment could help to improve the corporate governance in business practices.

Details

Social Responsibility Journal, vol. 2 no. 1
Type: Research Article
ISSN: 1747-1117

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Article

James R. Barth, Tong Li, Wen Shi and Pei Xu

The purpose of this paper is to examine recent developments pertaining to China’s shadow banking sector. Shadow banking has the potential not only to be a beneficial…

Abstract

Purpose

The purpose of this paper is to examine recent developments pertaining to China’s shadow banking sector. Shadow banking has the potential not only to be a beneficial contributor to continued economic growth, but also to contribute to systematic instability if not properly monitored and regulated. An assessment is made in this paper as to whether shadow banking is beneficial or harmful to China’s economic growth.

Design/methodology/approach

The authors start with providing an overview of shadow banking from a global perspective, with information on its recent growth and importance in selected countries. The authors then focus directly on China’s shadow banking sector, with information on the various entities and activities that comprise the sector. Specifically, the authors examine the interconnections between shadow banking and regular banking in China and the growth in shadow banking to overall economic growth, the growth in the money supply and the growth in commercial bank assets.

Findings

Despite the wide range in the estimates, the trend in the size of shadow banking in China has been upward over the examined period. There are significant interconnections between the shadow banking sector and the commercial banking sector. Low deposit rate and high reserve requirement ratios have been the major factors driving its growth. Shadow banking has been a contributor, along with money growth, to economic growth.

Practical implications

The authors argue that shadow banking may prove useful by diversifying China’s financial sector and providing greater investments and savings opportunities to consumers and businesses throughout the country, if the risks of shadow banking are adequately monitored and controlled.

Originality/value

To the authors’ knowledge, this paper is among the few to systematically evaluate the influence of shadow banking on China’s economic growth.

Details

Journal of Financial Economic Policy, vol. 7 no. 4
Type: Research Article
ISSN: 1757-6385

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Book part

Agrata Gupta and Chun Xia

The chapter studies the role of Financial Technology (FinTech) in disrupting the existing traditional banking system. It identifies FinTech’s evolution in Asia across…

Abstract

The chapter studies the role of Financial Technology (FinTech) in disrupting the existing traditional banking system. It identifies FinTech’s evolution in Asia across Deposits & lending, Capital Raising, Investment Management, Market provisioning, Payments, and Insurance. This technology revolution allows us to have a banking system based on values that serve customers better, reduce risk to the society and improve returns for the shareholders. Data on unbanked population, smartphone penetration, and Internet penetration has led to retail side innovations such as Mobile Wallets, P2P Payments, and Real-time Payments in the most of Asia (except China). A total of 49% of Global Investments in FinTech are in Asia and the Chinese dragon alone accounts for 46%. India is witnessing a strong amount of FinTech deals in 2017 and it is being driven by payment and lending solutions. ASEAN FinTech industry is dominated by m-wallets and online payments; this is followed by retail investment and financial comparison. The chapter dives into the challenges Asian banks are facing because of this disruption. Now more than ever, is the important role governments and central banks of each nation play to assess the path these start-ups are headed on and this will unfold the landscape of banking in Asia a few years down the lane.

Details

Banking and Finance Issues in Emerging Markets
Type: Book
ISBN: 978-1-78756-453-4

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Article

Md Nazirul Islam Sarker, Most Nilufa Khatun and GM Monirul Alam

The purpose of this paper is to explore the unique aspects of Islamic finance and its role in economic development. It also explores the suitability of Islamic finance in China.

Abstract

Purpose

The purpose of this paper is to explore the unique aspects of Islamic finance and its role in economic development. It also explores the suitability of Islamic finance in China.

Design/methodology/approach

The paper explores the potential of Islamic banking and finance for economic sustainability in China. This study adopts the content analysis approach and focuses on various aspects of finance. Moreover, a critical investigation has been done by using various indicators of a new finance system adoption by considering the economic, cultural, religious and political aspects of China.

Findings

The study reveals that China already tested Islamic finance on a pilot basis in Ningxia, China. China is suitably positioned to adopt Islamic finance for its economic development. It also reports that Islamic finance will be more helpful to implement One Belt One Road initiative of China, as the Gulf and Arab Islamic finance-based countries are the major partners of China. This study analyzes Islamic micro-finance literature and proposes suitable measures for adoption in China.

Practical implications

Despite some limitations, the findings have a large implication on Islamic financing in general. It will be helpful to researchers and practitioners to understand the Islamic finance model for implementing it in a new environment.

Social implications

This study analyzes the demand, rules and regulations, related challenges and potential of launching Islamic banking and finance in China.

Originality/value

This study analyzes the demand, rules and regulations, related challenges and potential of launching Islamic banking and finance in China. The paper fills a gap to the existing literature on Islamic finance uniqueness, challenges and opportunities from the perspective of a non-Muslim country.

Details

Journal of Islamic Marketing, vol. 11 no. 6
Type: Research Article
ISSN: 1759-0833

Keywords

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Book part

Ian Tsung-yen Chen

This paper proposes that if a political system is more like to facilitate a unified government, to establish a strong executive body and to respond to the needs of the…

Abstract

This paper proposes that if a political system is more like to facilitate a unified government, to establish a strong executive body and to respond to the needs of the majority, financial reforms are more likely to emerge from the policymaking process and produce positive results. On the contrary, political systems that discourage those governing features are less likely to produce reforms. This chapter compares financial reform processes in China, Taiwan and New Zealand. All of them performed low level of financial reforms in the early 1980s but resulted in different situations later. In the mid-2000s, New Zealand heralded the most efficient and stable financial system; while Taiwan lagged behind and China performed the worst. Evidence showed that China’s authoritarian system may be the most superior in forming a unified government with a strong executive, but the policy priority often responds more to the interests of a small group of power elites; therefore the result of financial reform can be limited. Taiwan’s presidential system can produce greater financial reform when the ruling party controls both executive and legislative bodies, but legislative obstructions may occur under a divided government. New Zealand's Westminster system produces the most effective and efficient financial reform due to its unified government and a strong executive branch with consistent and stable supports from the New Zealand Parliament.

Details

Asian Leadership in Policy and Governance
Type: Book
ISBN: 978-1-78441-883-0

Keywords

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Book part

This chapter examines China’s corporate governance and accounting environment that shapes the adoption of internationally acceptable principles and standards…

Abstract

This chapter examines China’s corporate governance and accounting environment that shapes the adoption of internationally acceptable principles and standards. Specifically, it examines international influences, including supranational organizations; foreign investors and international accounting firms; domestic institutional influences, including the political system, economic system, legal system, and cultural system; and accounting infrastructure. China’s convergence is driven by desired efficiency of the corporate sector and legitimacy of participating in the global market. Influenced heavily by international forces in the context of globalization, corporate governance and accounting practices are increasingly becoming in line with internationally acceptable standards and codes. While convergence assists China in obtaining legitimacy, improving efficiency is likely to be adversely affected given that corporate governance and accounting in China operate in an environment that differs considerably from those of Anglo-American countries. An examination of the corporate governance and accounting environment in China suggests heavy government involvement within underdeveloped institutions. While the Chinese government has made impressive progress in developing the corporate governance and accounting environment for the market economy, China’s unique institutional setting is likely to affect how the imported concepts are interpreted and implemented.

Details

Adoption of Anglo-American Models of Corporate Governance and Financial Reporting in China
Type: Book
ISBN: 978-1-78350-898-3

Keywords

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