The Anglo-Saxon paradox: corporate governance best-practices and the reform deficit in China's banking sector

Abstract

Corporate governance is now a key concern in China's banking sector. Its importance is related to the important policy questions of how to foster economic growth without increasing inflation in an environment where monetary guidance does not function in a conventional manner and there exist few constraints on bank lending. Under such an environment top-down best practice models offer considerable appeal, but their implementation in China's banking sector suffers from a reform deficit. In this context, this study argues that innovative reforms that draw on existing institutions and expertise such as the reform of the China Postal and Savings Bank and the relaxation of restrictions on foreign banks in the rural sector indicate a unique and policy-driven response to this conundrum. Their advantage is that they provide the state with a ready-made platform to influence economic activity in the rural economy.