Economical Development of Chine Literature review

Economical Development of Chine - Literature review Example From the 1979 to 2005, the GDP of China has grown at an average of 9.6% annually (Morrison, 2006, p.3). At this pace at the end of the year 2010 China has became the second largest economy of the world after the United States. Before the year, the economy of Japan was the second largest economy. During the financial crisis, the export business of Japan has decreased but in the other hand the manufacturing industry of China has grown. The pace of economic growth of China has made the analysts to forecast that China will replace the United States as the largest economy of the world (BBC, 2011). The economic prosperity of a country can measure by the per capita personal income of the people of the country, the employment growth of the country, the population growth of the country, the average educational qualification of the people of the country (Muskegon Area Sustainability Coalition, 2012). For developing a country, it is necessary to develop all the parameters, which has mentioned e arlier by the researcher. Therefore, for developing all these parameters the banks and the government have to take necessary steps like to form some policies, which would help to increase the income of the fellow citizens. China has taken such steps for improving the financial condition of the people and the country. In the decade of 1960 and 1970s, the banks acted as the cahier of the Chinese government. There was no equity market that time in China. In the decade of 1980s, two major reforms changed the structure of the Chinese economy. The commercial banking function of the country has separated from the central banking function. The mono-banking system of the country also broke by the government. There are three tiers in the banking system. The first tier of the banking system comprises of the policy banks of China, which includes the Agricultural Development Bank, Import and Export bank and the state development banks. The objective of these banks is to provide the needed financ e to the government for various projects. Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank of China and Bank of China are among the second tier banks of China. During the reform period, the second tier banks have provided a large amount of loan to the government and the people also. The third tier banks of China include Huaxia bank, Shenzhen Development Bank, Pudong Development Bank, which are the regional banks of China, and the main financer of the state owned enterprises. There are also the financial institutions like the urban credit cooperatives and the rural credit cooperatives. The third tier banks and the non-banking financial institutions of China are more profit-oriented organizations. The loan rate of these organizations is more flexible and they are not there to lend to the government like the first and second tier banks. The first and second tier banks i.e. the policy banks and the four main banks (which are of the second tier) owne d by the central government completely, where, the third tier banks are owned by the states, or the large state owned enterprises or they owned by multiple shareholders. From the year 2001, the Chinese government has agreed to list minority stakes of the commercial bank in the stock market and the stakes are there for the foreign investors. Though it has been reported that the development was not so successful; but