China’s banking regulator has recently announced that they will create as many as five privately financed banks to support economic growth. The goal is to promote “modernization of governance.”
China’s economic growth took a turn for the worst in the second quarter of last year with a low of 7.5%. In the third quarter, growth did rebound to 7.8% and the Cabinet is expecting growth for the full year of 7.6%. This would end up being the weakest performance since 1999.
The Chinese banking authorities will be supervising the new institutions, although they will be funded through private enterprise. As described in a recent article, “The new move is part of an effort by CBRC to ease to flow of foreign capital into the Chinese banking sector. According to Xinhua, the regulator will also be investigating the possibility of lowering the threshold required for foreign banks to enter the country.”