Abstract

The paper reviews the development process of bank and microfinance sector in China and present regulatory status. Financial sector is largely bank-based and dominated by the four state commercial banks in China. However, government liberal policy and special attention to financing underdeveloped regions and SMEs have gradually improved the scenario. The development of non-state banks, non-bank financial institutions and MFIs has extended financial services to the areas where state banks were previously not so active. Consequently, government banks, microcredit companies along with some national and international MFIs and donor agencies have started their business in a significant pace but the market freedom is still questionable? The benefit of microfinance services lies on government favorable policy formulation and allowing MFIs reasonable freedom to booming the sector. Thus, it is suggested that government authorities should take necessary steps for resolving the existing barriers of the promising microfinance sector in China.

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