Publication

This paper estimates the effectiveness of capital adequacy regulation in improving capital ratios and restraining risk-taking behavior of Chinese banks. The data shows that most domestic banks in China do not meet the minimal capital requirement. The author argues that recapitalization for state-owned banks should be implemented to improve capital adequacy of Chinese banks. Furthermore, the author suggests an ownership reform so that government can focus on its role as a regulatory and supervisory agency instead of a bank owner.