Chinese Financial Market Development and Risk Management in Banks

Abstract

This study is to examine Chinas financial market and its current risk management status and

to aid various financial institutions efforts in strengthening the nations credit scoring and asset

management disciplines by exploring the potentials of implementing advanced corporate credit

risk evaluation systems.

Chinese banks, which constitute over 78% of the total Chinese financial market, are still

dependent on deposit-loan margin structures. Thus there are elements that call for improvements

in the overall credit risk management operation. Their credit evaluation system including

corporate failure prediction, which is axial in the credit rating and post management process,

should be designed as a part of a comprehensive evaluation system, taking consideration of each

institutions evaluation purpose, usage and the current management system.

To foster and strengthen its financial industry, China should focus on implementing a

modern financial system that shifts from quantitative expansion to qualitative improvements. It is

also urgent that the financial system and practices meet global standards for the structuring and

modernization of a corporate credit evaluation system that is specific to China.