China's state-owned banks have been the target of major reforms over the past few years. New governance structures have been introduced, recapitalization of 3 banks undertaken, and foreign strategic investors brought in.
How far have the Chinese banks come in shedding their state-led pedigree? The jury is still out, says an IMF Working Paper, which looked at Chinese bank lending patterns between 1997 and 2004. It remains unclear, the paper notes, whether lending decisions have started to be taken on a commercial basis. Furthermore, the "pricing of credit risk remains undifferentiated and banks do not appear to take enterprise profitability into account when making lending decisions." There have been improvements, including the slowing of credit expansion. More details in the IMF Working Paper.
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