Ｃｈｉｎａ’ｓ Ｂａｎｋｉｎｇ Ｒｅｆｏｒｍ ｉｎ Ｐｒｏｇｒｅｓｓ

Introduction

The World Bank (1997) once claimed that China's financial sector was the soft-belly in the economy. Financial sector reform has long been argued as neces-sary to raise efficiency in the use of the capital and in rebalancing the economy toward consumption-based growth， with-out which the country's growth sustain-ability is in jeopardy (see Lardy (1998);Prasad (2007)).Indeed， not too long ago，China's state banks were deemed \"techni-cally insolvent\" and their survival hinged solely on the nation's abundant liquidity.However， after the launching of banking reform， strong profitability has returned to state commercial banks recently. The aim of this paper is not to evaluate the effect of banking reform on bank performance，which is better tackled after the comple-tion of a full credit cycle. Rather， our aim is to take stock on the progress in reform-ing China's state banks by reviewing the banking reform strategy and analyzing their recent strong post-reform financial performance which， however， cannot be entirely separated from reform efforts undertaken thus far.