The importance of banking in China's financial system

 Name:Qidi Dong

Student number：40295021

 

There are six financial systems in China: the People's Bank of China, the government, commercial Banks, securities companies and other financial investment institutions, enterprises and individuals. Due to the development of the global epidemic, China's financial market will inevitably be hit, which may be of a long-term duration. Therefore, when problems occur in the financial system, it will directly affect the financing of financial practitioners and the whole system, causing stagnation of their economic activities and decline of economic liquidity.

The banking industry, as the main body of China's financial system, needs to play a financial role and is dominant. From 2003, the bank of China's asset scale is less than 30 trillion to nearly 300 trillion now, developing rapidly. However, due to the current impact of the epidemic, the financial level will also be subject to some uncertain factors. In China, the main financing mode of some large enterprises is through bank credit. When monetary policy is used to support the real economy, the bank plays a regulatory role.

Secondly, the biggest challenge brought by the COVID-19 to China's financial market is the banking industry, because the profit of the banking industry is mainly derived from the spread of deposit and loan, while the epidemic suppressed the consumer desire of residents, affected the behavior of consumers and the confidence of investors. According to statistics, the proportion of consumer economy in China's GDP after 2018 exceeds that of investment and other forms, so it takes a heavy share. The impact of the epidemic will be greater, leading to a decline in the effective loan demand of the banking industry, which will face great pressure, and the impact will spread to the entire financial market. However, on the other hand, although the structure dominated by consumption will be affected in the short term, when some policies are implemented, they can directly stimulate consumption and guarantee employment, stimulate domestic demand, and thus boost economic growth, and also achieve the effect of repairing the economy in the short term.

For the present stage of China's banking sector in the financial system, the focus should be to provide a more appropriate monetary policy environment, because the bank by spread income, so monetary policy is clearly pointing in the direction of best, and the central bank may also be a period of time in the future we will continue to increase investment in the financial market liquidity.

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