Is a New Broom Sweeping Clean? The Emergence of the China Banking Regulatory Commission

Stefan Brehm, Lund University
Christian Macht, Boston Consulting Group

Abstract

In recent years, the Chinese legal system has come closer to meeting international concepts in the area of banking regulation and supervision. This may be seen as China's self-imposed commitment to the rules of the "international community" in order to become a reliable global partner. There are important aspects that still deviate from international standards and opinions about the changes are divided even within Chinese society. We show that the new laws and regulations mark a fundamental change in the promotion of operational independence for supervising agencies, whereas political influence of the central government still remains strong. This can be explained by the central government's aim to weaken local and provincial governments' interference in the business of commercial banks while protecting its own abilities to control macroeconomic performance via the banking system.