Maintaining Financial Stability in the People's Republic of China during Financial Liberalization

Nicholas Borst (Federal Reserve Bank of San Francisco) and Nicholas R. Lardy (PIIE)

Working Paper
15-4
March 2015

China's banking system is now the largest in the world, and its capital markets are rapidly approaching the size of those in the advanced economies. Borst and Lardy trace the evolution of China's financial system away from a traditional bank-dominated and state-directed financial system toward a more complex, market-based system. They analyze and outline the optimal sequence of financial reforms needed to manage the new risks accompanying this evolution.

Data disclosure: The data underlying the figures in this analysis are available here [zip].