Financial reforms to squeeze Chinese banks

Interest rate liberalisation and freer capital flows are the prime candidates for financial reform this year. But there will be negative shocks on Chinese bank margins.

Chi Lo

March 19, 2003

Given the importance of financial stability, Beijing will only take a gradualist reform approach. It will only allow limited freedom for domestic investors to invest overseas via the Qualified Domestic Institutional Investors (QDII) scheme. Hence, do not expect any acceleration in full capital account convertibility, and Hong Kong stocks will not get a boost from Mainland money just yet.

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