The Choice Of System Of China State-owned Banking Reform

State-owned bank system exists in the world widely. State-owned banks exist not only in the transition economy but also in the developed countries such as Europe mainland at special period. As usual, state-owned bank is correlated with some government's goals concerning with society or economy. Since 1950's, many countries especially transitional economies have started marketing reform comprising state-owned bank reform as an important aspect at the background of economy and finance globalization. Majorities of countries adopted market orientation and privatization method designed on mainstream economy and finance theory. As a result, the reform of state-owned bank in Europe mainland is successful while the reform of state-owned bank in transition economy is unprosperous with financial crisis. The same method induces deferent results, which is worth studying.On the other hand, China's gradual reform makes great success since 1978. China has maintained rapid economic growth and price stabilization with the fiscal circumstances being worsen, which is difficult to find a favorite explain in the frame of mainstream economy and finance theory. As a fact, state-owned banks have been played an important role in China's economy market orientation as China is a bank-oriented financial system. The historic role and evolvement logic of China's state-owned banks should be surveyed broadly. As deepening of economy market orientation, state-owned bank reform becomes a vital factor of stabilization and growth of China's economy. Though state-owned bank reform has made breakthrough after joint-stock reform in 2003, the state-owned bank reform has not completed and we still face several problems and challenges. How to improve state-owned bank reform is focused by academe and decision-maker yet.To meet the theoretical problem and realistic challenge, by summarizing the research been made, the state-owned banking system and its reform in China and foreign countries and using several analysis methods such as institutional analysis, this paper focuses on the policy operation of China's state-owned banks in the course of economy market orientation and studies the choice of system of the reform, and provides gradual angle and practical choice of China state-owned banking reform, which tries to provide another idea and policy advice.At first, the paper reviews all researches on state-owned bank reform made by foreign and domestic researchers. Then it points out that these researches focus on only some limited fields of state-owned bank reform and lack a uniform analysis framework based on Chinese fact that unifies several parts into an integrated logic. The research that concerning the system basis and outer circumstance of state-owned banks is less. At present, we need a uniform theoretical framework that not only accords with system circumstance and the course of gradual reform but also has gradual and long-term angle. Then, the paper introduces the state-owned banking system and its reform of foreign countries as to provide an international aspect of state-owned bank reform. We find that state-owned banks occupy an important position and have played an important role in the world. Also, by analyzing the experience and lesson of state-owned bank reform, we find that system circumstance, system correlation, reform order and the role of government should be attached importance in the state-owned bank reform.Thereafter, the paper analyzes the historic role of China's state-owned banks and points out that the existence, development and reform of state-owned banks is according with system choice of state. In the course of China's economy transition, the government faced several vital challenges, such as mobilizing and dominating social resource, increasing economy efficiency, keeping impartiality, and so on. Since reform and opening, China's fiscal ability decreased dramatically while there was much financial surplus in economy. In this instance, China strengthened the control of finance especially state-owned banks to substitute the decrease of fiscal ability as China has strong state ability in the course of economy transition. So the state-owned banks took on some policy burden, which lied as follows: finance substituted revenue in resource mobilizing, finance substituted fiscal in resource allocation. This system arrangement forms a semi-inner organizational relation among state, state-owned banks and state-owned enterprises, by which state can allocate credit and resource availably through controlling state-owned banks, which saves transaction cost and promote economy growth and ensure the reform. Nevertheless, The inner cost must come forth with the reform proceeding and resulted in bad loans at last.Since the bad loans of state-owned banks are the representation of the inner transaction cost, the problems of China's state-owned banks must be related to it. State-owned banks have taken on such policy burden as subsidy for state-owned enterprise, which resulted in bad loans because of inefficacy of state-owned enterprises. Nevertheless, state cannot distinguish policy bad loans between commercial bad loans because of asymmetric information. State-owned banks easily engaged in the moral risk to use policy bad loans cover up the commercial bad loans. Therefore, the state has to take the responsibility for all state-owned banks'bad loans, which led to the state-owned banks'soft restriction on the budget. Moreover, through the analysis of property right and banks'performance, it was discovered that the state-owned property right did not necessarily lead to low efficiency and the property right structure was not directly related to banks'performance. Thus, the root of state-owned banks'problem exists in the policy burden carried by the state-owned banks instead of in the property right structure. The state-owned banks should focus on resolving policy burden problems firstly.However, the unilateral market-oriented style was adopted during China state-owned banks'reform. Even though state-owned banks'status was highly improved after the joint-stock reform, the state-owned banks'financial performance was not fundamentally changed because policy burden was not eliminated at all. The market-oriented reform proceeded hardly. On one hand, the state intended to improve the efficiency of the state-owned banks and decrease the cost through the market-oriented reform under the pressure of the cost rise and the finance's opening up. On the other hand, the state still wanted to control the state-owned banks, having them carry the policy burden, to fulfill the policy and strategic purpose. In the long run, the market-oriented reform for the state-owned banks accords with the logic of China economy's reform. The state-owned banks are going to and have to go onto the market-oriented road finally with the deepening of china economy's market-oriented reform and the improvement of economic systems. But the key of the point is that, under current situation, the policy burden should firstly be paid attention to and resolved because the state-owned banks'reform is systematic work and takes time. Otherwise, the contradiction between the policy and market is never to be resolved. In another word, if to improve the efficiency of the state-owned banks, the policy obligations must be eliminated. On the contrary, if to take the policy obligations, the efficiency cannot be improved.In recent years, the need that the state have the state-owned banks take the financial policy obligations was dramatically reduced since the state's financial capability was highly improved. However, there are still a lot of policy financial needs existing in the economy because of the extent limitation of China economy's market-oriented reform and imperfection of market systems. So the state-owned banks still take the policy financial obligations for sustaining the monetary stability and of credit's transferring payment. Under this situation, the system choice of China state-owned banks'reform should follow two rules. The state-owned banks'reform is gradual and marginal. With the deepening of the economy's market orientation and the improvement of related systems and circumstances, the state-owned banks'market-oriented reform will finally succeed and the banks will turn into the real commercial joint-stock banks. However, that is a gradual and long-term process. Currently, to quickly improve the status of the state-owned banks, the feasible choice is to conduct classifying reform. In regard to ICBC, BOC and CCB, policy obligations should be eliminated firstly, and then joint-stock reform should be conducted. ABC should continue to have all policy business and the coming policy obligations. When circumstance is mature, the policy business should be transferred to policy banks, after which the joint-stock reform could be conducted. Even though the current joint-stock reform is not totally accordant with the mentioned logic, the current one could be regarded as a transitional choice. However, in the long run, a new round reform is inevitable, so the choice according to the logic presented in this article will be more reasonable.