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Deposit Insurance around the WorldIssues of Design and Implementation$
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Asli Demirguc-Kunt, Edward J. Kane, and Luc Laeven

Print publication date: 2008

Print ISBN-13: 9780262042543

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262042543.001.0001

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Protecting Depositors in China: Experience and Evolving Policy

Protecting Depositors in China: Experience and Evolving Policy

Chapter:
(p.335) 10 Protecting Depositors in China: Experience and Evolving Policy
Source:
Deposit Insurance around the World
Author(s):

Patrick Honohan

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262042543.003.0010

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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