Govenrment and Business Environment Case Study

China’s Banks and the Overheating Economy

OR

Abstract:
China embarked on its 'open door policy' in 1978 under the leadership of Deng Xiaoping. The purpose was to bring about a transition in its centrally planned economy towards a market economy. The banks were supposed to play a major role in carrying out the reformist agenda of the country. Since then the country has achieved a phenomenal GDP (gross domestic product) growth rate making it the fastest growing economy of the world.

Pedagogical Objectives:

• To understand the role played by the banking sector of China in building its economy
• To understand the process by which the banks injected liquidity in the economy in the form of easy loans, which eventually led to the overheating of the Chinese economy
• To discuss the possible measures that the government can take to tackle the problem.

Keywords : China's overheating economy, Government and Business Environment Case Study, Chinese banks, People's Bank of China, State-owned enterprises, Gross domestic product (GDP), Private domestic savings, Liquidity and easy credit, Non-performing loans (NPLs), Guanxi, Inflation rate and interest rates, Monetary policy, Agricultural Bank of China, People's Construction Bank of China, Industrial and Commercial Bank of China, Bank of China