Overhauling China's banking system: the regulatory issues

China is in the midst of a difficult transition from a banking system that supported a planned economy by providing easy credit to state-owned enterprises to a commercially based banking system. A key element of China's reforms is the creation of a more effective regulatory system. To this end China established the China Banking Regulatory Commission (the "CBRC") in April 2003 and enacted fundamental banking legislation in December 2003. This article covers recent legislative and regulatory developments, and briefly addresses China's attempts to cope with nonperforming loans and its plans to list two of the wholly state-owned banks. (For a discussion of foreign investment in China's banking sector, see article: Banking on foreign Investment: Recent Developments.)