China’s Financial Innovation

Abstract Substantial innovations have happened in China’s financial sector over the past four decades, ranging from the significant increase of institutions, changes of market structure, and development of products to the improvement of regulatory frameworks. These changes and innovations reflect China’s transition from a centrally planned economy to a modern market economy; persistent demand of various financial services derived from the government, corporations, and individuals in a period of rapid economic growth; and alternatively occurring regulation and deregulation by the authorities. The unprecedentedly advanced progress of technology, especially the emergence of modern information revolutions, makes all these changes and innovations possible. Financial innovation has made profound impacts on China’s economic efficiency, financial stability, and social equality, among them some quite positive and some relatively negative.