China Has On The Disposal Of Financial Institutions

Many unhealthy financial institutions in China usually originate from the fiscal investment transfer, local government intervention, the immature financing system, lack of ownership under the state-owned structure, too long chain for the internal control and external agency, and the bubble economy. On the other hand, they are due to inefficient monitoring management, and invalid market organism. The unhealthy financial institutions will definitely have serious damage on the real economy, and will result in series of horrible negative externality. Furthermore, they will have Matthew domino effect, causing banking industry crisis and financial crisis.Looking around the world, the whole frame for dealing with those unhealthy financial institutions comprises of three parts: the rescuing organism, organism for exiting the market, and the saving insurance system (system for protecting the investors). China should learn from the other countries in dealing with unhealthy financial institutions with the high transparency, high level legalization, and harmonious cooperation among the related parties. The practices in other countries have also proved that quick actions are very important as well.The major part of China's current financial reform lies in the actions for rescuing the state-owned commercial banks, which include but are not limited to: capital input into the four state-owned commercial banks with foreign currency reserve, inviting strategic investors, reform on the stock system, and issuing shares in the stock market. These actions have improved power of the financial institutions, enhanced the corporate management structure of the financial institutions, and helped the financial institutions operate under the structure of transparency and standardization. Most of the trust investment companies have been closed. As to dealing with the stockjobbers of problems, actions have been taken such as conducting reform on dividing the ownership, and series of punishment for irregular activities in the stock market. Those stockjobbers with serious problems have been either closed or sourced out for management. The investor protection fund has been established in the process of dealing with the stockjobbers of problems.Due to various reasons, some problems have been found while dealing with the financial institutions, which include low efficiency, leakage of state-owned assets, being lack of related laws, no self-recovering ability of the rescued financial institutions, series of problems after being rescued, problems found in the rescued institutions, etc. In order to solve these problems thoroughly, a long-term organism for healthy development of the financial market has to be established in a way that both the government and the financial institutions will take actions and regard the market as to the core of business. With improvement in management methods and market economy, it can be believed that China's financial market will enjoy a sustainable, healthy and rapid development.