Financial Trilemma in China

Question: Discuss about a Report for Financial Trilemma in China. Answer: Introduction In this assignment, the influence of banking sector in economic growth of India and China will be discussed and a comparative analysis will be made based on this. An institution is called a Bank that accepts deposit from the public, which can be withdrawn by cheque and uses that deposit for lending to firms, household and government (Nicholson and Salaber 2013). The Reserve bank of India (RBI) is the central bank of India whereas Peoples bank of China (PBOC) is the central bank of China. Rationale This topic is selected because now a days banking sector is booming at a huge pace. Numerous numbers of private and commercial banks are coming into the mainline and government of both the company is giving them license (Shahbaz, Khan and Tahir 2013). This is because now a days banks are providing various services to their customers in the form home loan, cash credit for business, ATM card, credit cards, foreign exchange services and many more. They are also giving employment of huge number of student who has just completed their studies in finance and willing to make a career in banking (Reinhart and Rogoff 2013). Banking sector is giving huge future prospects to the MBA students to cater their skills and knowledge and contribute to the economic growth. Scope This given topic will give an in-depth knowledge and understanding of the structure of banking system in china and India and their impact on the financial development and economic growth in their respective countries (Aizenman and Sengupta 2013). Analysis of how the banking system works towards the regulating the flow of money from household to industries and how they are being governed. Prospects of Indian and Chinese MBA students in this sector and their growth are also within the scope of this topic. Aim The aim of this assignment is to understand the impact of banking sector in economic growth of the county and provide a comparative analysis of Indian and Chinese Banking sector. Objectives The main objectives of this assignment are to understand the following: Banking sector of which country between India and China are contributing more towards economic development increasing the gross domestic product of the country. Focus on the generation of employment to the freshers and experienced people in this sector Provide an overview of how income is generated and investment is made in the form savings, which again generates income. Various funding provided by bank towards development of infrastructural facilities and growth of various organization. Implication of banking sector on foreign exchange, risk exposure involved in it and hedging facilities provide to various traders (Kaura 2013). Theory Reserve Bank of India is the Indians Central bank, which started operating from 10th April, 1935. This Central Bank is categorized into Scheduled And Unscheduled Bank. Commercial banks and cooperative banks fall under the scheduled banks (Panagariya 2013). Commercial banks are further subdivided into Public banks, Private Banks, Foreign Banks and RRBs, Rural banks and urban banks are two divisions of Cooperative Banks. Scheduled banks are those banks, which are listed in the 2nd schedule of RBI whereas unscheduled banks are those that are not listed. Similarly, CBRC and PBC is the central bank of China, which is responsible for implementing and formulating Chinas monetary policy. CBRC and PBC is further categorized into foreign banks, UCCs and RCCs, Policy banks and Domestic Commercial Banks(DCB). DCB mainly comprises of CCBs, SOCBs and JSCBs. CCBs means China Construction Banks which in involved in the development of the infrastructure of the country. SOCB is the abbreviation of State Owned Commercial Bank and its main function is to supply funds to the urban areas of China and its manufacturing and industrial sectors (Khanna 2013). JSCBs are the Joint Stock Commercial Banks, which finances mainly government projects and whose majority of shares Chinese corporations and foreign banks own. Some of the major concerns of Indian Banking sector are high completion as every bank is providing same types of services to their customers. Cost of training their employees is very high because of high accretion rate. Increase of non-performing asset as economy has slowdown in the last few years and banks have given huge loans to their customers. Figure1: Banking Theory of Financial Intermediary (Source: Werner 2015) Banks acts as a financial intermediary connecting lenders and borrowers i.e. they borrow from the person who wants to deposit and lends to the person who wants to invest. In a economy which is capitalized most of the investment projects are managed and owned by private firms and entrepreneur and they lacks funds in the form of equity to finance this projects. Therefore, they take loans from banks to invest in these projects. Being a financial intermediary is a banking model in which asset is purchased from funds acquired by way of deposit or issue of bonds and equity. It provides a channel in which funds from surplus units are transferred to units that are in deficit (Werner 2015). Bank serves the various needs of lenders and borrowers by converting low-risk, liquid and small size deposits into higher risk, illiquid and larger size loans. At date 0, total asset financed is L+S0. It is financed partially by deposit which are payable on demand. In addition to this bank can also raise fund from public market. At date 2, when these funds mature it can be thought of either equity or bond. Integration areas of MBA Various MBA colleges in India and China are offering specialization courses on banking and providing placement opportunities to their student in many top banks in the country (Bardhan 2012). Various banks are also trying to absorb MBA students as they have a good sense of knowledge and concept to understand the financial and economic activities in banking sector. Method of Analysis This study was mainly based on the reviews of the customers. Survey was conducted to get the feedback of the customers regarding the services provided by the Chinese Banking Sectors. Survey Questionnaire was circulated among the customers and they were asked to give a rating of 1-10 for each of the services of the Bank. These services includes cash deposit procedures, Loan advancement, credit card and debit card facilities (Shahbaz, Khan and Tahir 2013). Reviews of the customers regarding Quick ATM service, House loans and Car loans were also considered keeping in mind the fact these have now become the urgent need of the population in order to maintain the standard the living. Scope of Employment and career growth in the Banking Sector is also an important part to analyze in this study. Young Employees of the banks were asked about their job satisfaction and future prospects in this sector (Nicholson and Salaber 2013). Whether there is any scope for MBA students in the banking sector is also taken into consideration. Effects of banking sector in raising the GDP of the country is analyzed by interviewing some of the high professional in this sector and listening to the speech given by the governor of RBI Mr. Raghu Ram Rajan on the economic growth, GDP and its relation with banking sector available on various websites and journal. Steps taken y RBI and PBOC in managing the inflation of the country is also analyzes Evidence Data is collected from various websites, journal, books, surveys and questioner where comparison on Indian and Chinese banking sectors and its influence on economy, growth, GDP and inflation is given. References Aizenman, J. and Sengupta, R., 2013. Financial trilemma in China and a comparative analysis with India.Pacific Economic Review,18(2), pp.123-146. Bardhan, P., 2012.Awakening giants, feet of clay: Assessing the economic rise of China and India. Princeton University Press. Kaura, V., 2013. Antecedents of customer satisfaction: a study of Indian public and private sector banks.International Journal of Bank Marketing,31(3), pp.167-186. Khanna, T., 2013.Billions of entrepreneurs: How China and India are reshaping their futures and yours. Harvard Business Press. Nicholson, R.R. and Salaber, J., 2013. The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms.International Business Review,22(6), pp.963-980. Panagariya, A., 2013. India and China: trade and foreign investment.Economic Reform in India: Challenges, Prospects, and Lessons, p.96. Reinhart, C.M. and Rogoff, K.S., 2013. Banking crises: an equal opportunity menace.Journal of Banking Finance,37(11), pp.4557-4573. Shahbaz, M., Khan, S. and Tahir, M.I., 2013. The dynamic links between energy consumption, economic growth, financial development and trade in China: fresh evidence from multivariate framework analysis.Energy economics,40, pp.8-21. Werner, R.A., 2015. A lost century in economics: Three theories of banking and the conclusive evidence.International Review of Financial Analysis.