Question

8- Find the 5 errors in the following text. STATE & THE FINANCIAL SYSTEM IN CHINA State has very strong control over the financial system in China. In the banking system such control is possible because almost all banks are majority owned by the central government. However this does not mean full ownership; parts of the shares of the biggest banks are traded in stock exchanges and foreign banks are among the shareholders of some of them. The state has always used its control over the banks to channel funds to SOEs and local governments rather than the private firms. The state also uses this power to hold interest rates down; the interest rates for deposits and loans are fixed by the government. The state control over the stock and bond markets in China comes from state’s power to regulate these markets. In the earlier parts of the market reforms period, government used this regulatory power to channel funds to SOE’s; private enterprises had little chance to issue shares and raise funds in stock markets. Today, number of private firms listed in the Chinese stock exchanges far exceed the number of listed SOEs. In the bond markets however, most bonds are still issued by SOEs and local governments, with very few firms able to issue bond to raise funds.

Answer 1

Error 1 - In the banking system such control is possible because almost all banks are majority owned by the central government. Instead all the specialized banks are majorly owned by the central government.

Error 2 - The interest rates for deposits and loans are fixed by the government. It is fixed by the Peolpe's Bank of China.

Error 3 - The state control over stock and bond markets in China,comes from state's power to regulate these markets. Instead these markets have multiple regulators and state control over these market comes from domination of bond and stock market by interbank bond market.

Error 4 - today, the number of private firms listed in the chinese stock exchanges far exceed the number of listed SOEs. Instead,number of private firms has increased but not exceeded the number of SOEs.

Error 5-  In the bond markets however, most bonds are still issued by SOEs and local governments, with very few firms able to issue bond to raise funds. Instead, now bond market is also moving towards privatisation and more firms are able to issue bonds to raise funds.