Chines Market's Issues on its Economy

The People's Republic of China was announced on October 1, 1949, following the victory of Communist forces over the Kuomintang government, which f direct to the island duty of Taiwan. The new Communist regime received widespread external recognition, but it was not admitted to the United Nations in 1971 as case of China (replacing Taiwan).

From 1949 to the late 1970s, virtually all policies relating to the allocation of resources and the distribution of income were controlled by the central planners of the State Council in Beijing. Committed to a program of economic selfsufficiency, China traded only with countries that dual-lane its puritanical Marxist philosophy such as Cuba, northwestern Korea, North Vietnam, and Albania. Under Premier Deng Xiaoping, the Communist party began a process of economic liberalization in 1978 which subsequently led to the ending of agricultural communes, the creation of "special economic zones," and an sign attempt at privatizing state-owned industries (China Commercial Guide, 2004).

From 1953 on, the Chinese economy was defeat to central control within the framework of five-year plans. The Eighth Five-Year devise (1991-1995) and 10-year development program (1991-2000) called for average annual GNP addition of 6 per centum. It was hoped that over the decade, the rate of population affix could be restricted to an average of 1.25 percent per year. Economic reforms were to continue, and the pla

China's budget deficit continued to escalate during the 1990s, look-alike between 1993 and 1994 to $15 billion (or nearly 25 percent of total government receipts). The government was either unable or unwilling to reform the country's outdated monetary and fiscal systems, so inflation continued and increasingly autonomous provincial and municipal governments invested scarce capital in speculative real landed estate or contrasted ventures. Though real GDP per capita increase during that time, income distribution has worsened in recent years because of the record of Chinese development ("Market Economy," 1999).

Because foreign banks are not facing the problem of bad loans that Chinese banks are, and because foreign banks mother cultivated relationships with key Chinese organizations, there are nearly who feel that opening the banking industry to them will put Chinese institutions at a disadvantage. In general, however, opening the market to foreign competition is viewed as providing greater incentive to Chinese banks to egest to profitability, and these proponents note that foreign banks still ready significantly fewer branches sometimes as few as 11 compared to thousands for Chinese institutions than their Chinese counterparts. In addition, the Chinese banks have longstanding relationships with Chinese institutions, including government organizations, that can provide a competitive edge. In general, the opening of the market to foreign competition is expected to increase profitability among all of the institutions operating in China as competition forces greater internal controls ("Domestic Banking" n.p.).

Mingkang recognizes that foreign banks have considerable advantages when entering the Chinese marketing, the most significant of which is their long-run expertise in the financial services industry as well as their strong risk assessment skills. However, Mingkang as well as notes that the Bank of China has clients from the Fortune 500 among its customers, and that continue
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