Abstract
This article critically reviews the extent of regulatory capture in China's banking sector. China's banking regulation has been captured by various levels of government, as well as by the regulated banks (both Chinese and foreign). An analysis of the relationship between the principal regulator, namely the Chinese Banking Regulatory Commission, its affiliates, the central government (the Government) and local governments provides an understanding of the delicate networks that connect the principal regulator to the economic and social policies and ambitions of various levels of governments, and which result in the politicization of banking regulation in China. The author also points out that government ownership of Chinese banks, and the role of those banks in implementing fiscal policy, together with a regulatory intention to encourage foreign banks with a view to leveraging on their expertise in order to develop the Chinese banking sector, have all given rise to regulatory capture by regulated banks.
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