The Chinese banking system is in the midst of a generational program of reform as it transitions to a more open system supportive of China's emergence into global economics after decades of communism and state ownership. This program was started in the early 1980s and continues to the present day.

Chinese Banking Structure

The Chinese banking system used to be monolithic, with the People's Bank of China (PBC), its central bank, as the main entity authorized to conduct operations in that country. In the early 1980s, the government opened up the banking system and allowed four state-owned specialized banks to accept deposits and conduct banking business. These five specialized banks are the Industrial & Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC), Bank of Communications (BoCom), and Agricultural Bank of China (ABC).

In 1994, the Chinese government established three more banks, each of which is dedicated to a specific lending purpose. These policymaking banks include the Agricultural Development Bank of China (ADBC), the China Development Bank (CDB) and the Export-Import Bank of China. The four specialized banks have all conducted initial public offerings (IPOs) and have varying degrees of ownership by the public. Despite these IPOs, the banks are all still majority owned by the Chinese government.

China has also allowed a dozen joint stock commercial banking institutions and more than a hundred city commercial banks to operate in the country. There are also banks in China dedicated to rural areas of the country. Foreign banks were also allowed to establish branches in China and to make strategic minority investments in many of the state-owned commercial banks.

The total assets of the Chinese banking system were 254.3 trillion yuan, or US$14.4 trillion, in mid-2018. The five specialized banks controlled 90.4 trillion yuan or approximately 35.5% of these assets.

Chinese Banking Regulation

The main regulatory body that oversees the Chinese banking system is the China Banking Insurance Regulatory Commission (CBIRC), which replaced the China Banking Regulatory Commission (CBRC) in April 2018. The CBIRC is charged with writing the rules and regulations governing the banking and insurance sectors in China. It also conducts examinations and oversight of banks and insurers; collects and publishes statistics on the banking system; approves the establishment or expansion of banks; and resolves potential liquidity, solvency, or other problems that might emerge at individual banks. 

The People's Bank of China also has considerable authority over the Chinese banking system. Aside from the typical central bank responsibility for monetary policy and representing the country in an international forum, the PBC's role is to reduce overall risk and promote the stability of the financial system. The PBC also regulates lending and foreign exchange between banks and supervises the payment and settlement system of the country.

Chinese Deposit Insurance

China's Deposit Insurance Regulations went into effect in May 2015. Deposit insurance is provided to protect depositors from the loss of their funds and eliminate the possibility of a run on the bank if rumors spread about problems associated with a particular bank. 

The Chinese banking system is undergoing a program of reform to transition from state to private ownership and support the economy's move to capitalism. This reform started a generation ago and will continue for many years.