Protecting Depositors in China: Experience and Evolving Policy
Protecting Depositors in China: Experience and Evolving Policy
This chapter turns to the Chinese banking environment and how China has been responding to the huge loan losses and the growing scale of bank deposits. These scores suggest a worsening of moral hazard and the possibility that the preconditions for deposit insurance to improve bank soundness are not present. Small depositors in China, however, have not been left unprotected, even despite the fact that a formal system of depositor protection has not yet been established. The chapter then looks at China’s more recent experience and how the government’s role in Chinese banking system has been evolving. Furthermore, the chapter discusses how despite a formal system, China’s depositors remain protected in other ways. Finally, new deposit insurance schemes are suggested that have previously garnered positive results and even guided past rescues.
Keywords: moral hazard, Chinese depositors, Chinese banking system, depositor protection, China, government
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