China's bank reform needs vision

Reform will remain slow so that a freefloat of the RMB remains unlikely in the medium term and fixed income instruments will benefit.

Beijing's plans to inject fresh capital to recapitalize the Big Four state banks and to raise the foreign ownership ceiling of Chinese banks to 20% from 15% are crucial reform steps. Increasing foreign ownership will undoubtedly open the way for introducing international practice and expertise and market discipline to the Chinese system. However, these significant steps are still piecemeal, as China's leaders still lack an integrated and strategic vision to bank reform.

The basic problem is that China...

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