## Press Release: IMF Calls for Further Reforms in China's Financial System

_IMF News, November 14, 2011_

## Source details

**Canonical URL:** [Press Release: IMF Calls for Further Reforms in China's Financial System](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr11409)

## Other formats

- [Markdown version](/en/news/articles/2015/09/14/01/49/pr11409/index.md)
- [Structured JSON version](/en/news/articles/2015/09/14/01/49/pr11409/index.json)
- [Bundle manifest](/en/news/articles/2015/09/14/01/49/pr11409/bundle-manifest.json)

## Bibliographic details
- Published: November 14, 2011

---

### Overview
- Press Release No. 11/409
- Date: November 14, 2011
- The IMF's first Financial Sector Assessment Program (FSAP) review of China, carried out jointly with the World Bank, finds that China’s financial system is robust overall but faces a steady build-up in vulnerabilities.
- The FSAP is part of the IMF’s financial surveillance and monitoring of the international monetary system; FSAPs are mandatory at least once every five years for systemically important countries.

### Key near-term risks identified
- Deterioration in loan quality due to rapid credit expansion.
- Growing disintermediation by shadow banks and off-balance sheet exposures.
- A downturn in real estate prices.
- Uncertainties of the global economic scenario.

### Medium-term vulnerabilities and reorientation risks
- Medium-term vulnerabilities are building and could impair the needed reorientation of the financial system to support future growth.
- Moving toward a reoriented financial system will pose additional risks, making it a priority to establish institutional and operational preconditions for wide-ranging financial reform.

### Main areas of reform recommended
- Steps to broaden financial markets and services, and develop diversified modalities of financial intermediation that would foster healthy competition among banks.
- Reorientation of the role of government away from using the banking system to carry out broad government policy goals and to allow lending decisions to be based on commercial goals.
- Expansion of the use of market-based monetary policy instruments, using interest rates as the main instrument to govern credit expansion, rather than administrative measures.
- Upgrading of financial infrastructure and legal frameworks, including strengthening the payments and settlement systems, consumer protection, and expansion of financial literacy.

### Stress tests and resilience
- Stress tests conducted jointly by the Fund and Chinese authorities of the country’s largest 17 commercial banks indicate that most of them appear to be resilient to isolated shocks, including: a sharp deterioration in asset quality (including a correction in the real estate markets), shifts in the yield curve, and changes in the exchange rate.
- If several of these risks were to occur at the same time, the banking system could be severely impacted.

### Implementation and IMF support
- The Chinese authorities have begun to move on many of the IMF’s recommendations.
- The IMF stands ready to provide technical cooperation in areas relating to strengthening the financial stability framework in China.

### About the FSAP
- The Financial Sector Assessment Program, established in 1999, is an in-depth analysis of a country’s financial sector.
- The IMF conducts mandatory FSAPs for the 25 jurisdictions with systemically important financial sectors, and any member countries that request it.
- Assessments in developing and emerging market countries are conducted jointly with the World Bank.
- FSAPs include two components: a financial stability assessment (the responsibility of the Fund) and, in developing and emerging market countries, a financial development assessment (conducted by the World Bank).
- In September 2010, the IMF made financial stability assessments under the FSAP a mandatory part of IMF surveillance every five years for jurisdictions deemed systemically important.
- Countries listed as affected by that decision include: Australia, Austria, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, Italy, Japan, India, Ireland, Luxembourg, Mexico, the Netherlands, Russia, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
- For more information on FSAPs, see Press Release No. 10/357.

*Source: Press Release No. 11/409, November 14, 2011, International Monetary Fund.*

---

## Content in this bundle

- [Pr11409cpdf (PDF)](/-/media/websites/imf/imported/external/chinese/np/sec/pr/2011/pr11409cpdf.pdf){rel="external" type="application/pdf"}
- [Country Report (PDF)](/external/pubs/ft/scr/2011/cr11321.pdf){rel="external" type="application/pdf"}

---

## References

- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release No. 10/357](https://www.imf.org/external/np/sec/pr/2010/pr10357.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr11409_