Chinas Financial System - Case Study Example

The paper 'China’s Financial System' is a great example of a Macro and Microeconomics Case Study. Since the establishment of the People’s Republic of China in 1949, the Chinese financial system and the overall economy have evolved gradually. The wide range of changes witnessed over time has subjected the country to a series of economic growth and decline (Allen, Qian & Qian 2005; Brandt & Rawski 2008). Nevertheless, following the institution of new economic reforms in 1978, China has gradually become one of the fastest-growing economies in the world. Currently, China is considered to be the second-largest and most complex economy in the world. The current state of China’s economy is a product of its financial system. Over the years, China’s financial system has played a critical role in fuelling and supporting the country’s economy (Barth, Tatom & Yago 2009; Cheung & Haan 2013). According to Elliott & Yan (2013), China’s financial system has for several decades managed to perform well enough to support the rapid economic growth of the country. However, as the country is entering a new phase of economic development characterized by numerous uncertainties in the global market, there are doubts about whether the country’s financial system will be able to adapt and propel the country’s economy further. Some analysts have argued that China’s financial system is a major vulnerability or pitfall for the country’s economic development (Allen et al 2005b; Elliott & Yan 2013).

This paper seeks to critically examine China’s financial system. Firstly, it provides a brief history of the country’s financial system. Secondly, it outlines the main features of the Chinese financial system. Thirdly, this paper identifies key areas of the Chinese financial system that need to be modified or reformed and provides justifications on why these areas need to be reformed. Subsequently, it provides recommendations for the changes that should be implemented and justifications for these changes.