Abstract
Abstract Prior to the reforms financial resources in China were highly centralized. The mobilization and allocation of financial resources was done mainly through the state budget in conjunction with the state plan. This is evident from Table 7.1 which shows that household savings accounted for only 3 per cent whereas the state budget accounted for 46 per cent of total national savings on the eve of the reforms in 1978. Since the government was the main saver and investor financial intermediaries were neither necessary nor allowed. Hence, financial markets were closed, financial instruments were prohibited, and all financial institutions had been either confiscated or nationalized and were merged with the Peoples’ Bank of China (PBC) (Jao, 1989: 2).
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