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Accession To WTO In 2001, Made The Essay

Accession to WTO in 2001, made the China baking industry open to the global competition given in the time frame of 5 years. Chinese banks were notorious for their mounting non-performing loans and low efficiency. Even though Chinese banking industry was injected with procedural reforms and regulatory amendments still it was faced with state ownership dominance and monopolistic controls. Therefore the concern facing the banking industry of China was what measures to be adopted for increasing the efficiency of banking industry most importantly the state owned commercial banks that covers the largest share of the market [footnoteRef:1]. [1: CBRC, 'The Non-performing Loan of Major Commercial Banks in China' [2009] 3 accessed 19 March 19, 2011] Since U.S. financial industry is one of the leading in the global market therefore it can provide a guideline to the Chinese emerging banking industry in their way of restructuring and reformation of financial industry. The backbone of any financial industry is the banking sector therefore strengthening the banking industry mean flourishing the financial industry. For the purpose of intensification of the domestic banking industry it is important to gauge the internal environment of the country as well as scrutinizing the international elements that affect the performance of the domestic industry[footnoteRef:2]. Comparison between U.S. And China banking industry can give us some insight regarding the strategies for the development financial power. [2: RWolfrum and P. Stoll and M. Koebele, WTO -- trade remedies: General Agreement on Tariffs and Trade (BRILL 2008)]

COMPARISON MADE ON THE SETTING UP OF BANKING INDUSTRY BETWEEN U.S. AND CHINA

The comparison made between the banking industry of U.S. And china is focused broadly on three parameters namely comparison of goals, comparison of modes and comparison of results.

COMPARISON OF GOALS

Attaining the financial liberalization and collective welfare of the economy are the two core goals of the financial industry. Developing economies are in search for attracting investment for their economic development whereas developed economies who are rich in capital are seeking a profitable investment even in the developing economies. The imbalance of financial power is the decisive factor for financial liberalization. Signing of the agreement has not significantly impacted...

financial market however it has created opportunities through multi-trade agreement to trade in countries with limited barriers. The consequent effect of openness agreement has transformed the Chinese banking industry from planed economy to market-based economy[footnoteRef:3] . Chinese economy does have some powerful players in the banking sector but the government's unwelcomed intervention with policy regulation has prohibited the growth of the banking sector. Therefore international competition in the banking industry will give a boost in term of operational efficiency and effectiveness[footnoteRef:4]. [3: CBRC, 'The Non-performing Loan of Major Commercial Banks in China' [2009] 3 accessed 19 March 19, 2011] [4: K. Gupta, World Trade Organisation Volume 2: Exceptions to the Agreement (Atlantic Publishers & Dist 2006)]
COMPARISON OF MODES

The comparison of modes is made on the limitation of market access and limitation on the national level between U.S. And China. From the U.S. point-of-view it gives full national treatment to the foreign banks but imposes few trade barriers. This hinders the foreign banks business strategy who is planning to expand their size and market access. The financial regulation system also is not welcoming for the foreign banks and imposes various severe controls on the openness and business operations of the foreign banks[footnoteRef:5]. [5: H. Horn, The WTO case law of 2001: U.S. -- Export Restrains (Cambridge University Press 2003)]

On the other hand, china has more concentrated on the limitation of the appearance but in actually they are fewer in fact. For the stability and development of the financial system the opening up of the banks is adhered to the proper sequential process. When taken the consideration of geographic, the setting up regions is from developed area to less developed area[footnoteRef:6]. When taken the consideration of business affairs, the openness is from foreign currency business to local currency business. Administrative approval system, qualification research, licensing quantity limitations and operation regulation have also been considered for the evaluation of mode of openness and its frequency. Nevertheless, foreign banks have been assisted with sub-national treatment in terms of income tax, business coverage, loan income and pre-tax debt cancel. For example when taken the consideration…

Sources used in this document:
The banking regulation of foreign banks is very complex in U.S. both on state and federal level with different regulation institution for different business areas. While in China the governing regulatory bodies are China Banking Regulatory Commission and the People's Bank of China. Government still controls banks' regular operations and the market does not work effectively[footnoteRef:11]. [11: H. Song 'The Infrastructure of Foreign Bank Regulation in the U.S.' [2006]<http://business.sohu.com/20061215/n247071968.shtm> accessed 19 March 19, 2011]

CONCLUSION

With this comparison of setting up the banking industry in U.S. And China, it can be concluded that there exists likeness and disparity among the goals and modes of banking but the final result is the benefit of the whole economic system. China with its still prevailing short comes have shown considerable increase in the efficiency of the banking industry. Government can play a major role in the healthier growth of the banking industry and the positive overall impact on the economic state through its policy and regulatory measures.
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