Banking in China

The Chinese financial sector has grown at an impressive pace over the last decade, and its banking sector is now the largest in the world. China has also experienced a credit boom, which makes the need to better understand how the Chinese financial sector functions even more important. In this chapter, we first describe the structure and performance of the financial sector in China, focusing largely on banks. Next, we discuss how regulators’ efforts to slow the growth of bank intermediation have been accompanied by rapid growth in shadow-banking products, as banks try to circumvent limits on their ability to grow. Finally, we document China’s progress in expanding consumer access to formal financial services and track the recent expansion of FinTech, especially digital payment products.