Evolution of China’s Financial Asset Mix from 1991 to 2007

YI Gang ( 易纲)1 and SONG Wang ( 宋旺)2
1 China Center for Economic Research (CCER), Peking University
2 PhD Candidate of CCER, Peking University

Editorial Note:Since 1978, China’s financial sector has experienced successful reform and become increasingly market-based. The mix of China’s financial assets has also evolved during this time. What was the nature of this evolution? How will the current mix influence the country’s economic development? This paper attempts to answer these questions and suggests a path for China’s financial market development in the coming decade.

I. Foreword
Economic and social wealth roughly fall into the categories of either physical or financial assets.
Although they have a shorter history, financial assets now play an important role in modern society. With economic development, financial sophistication and the emergence of new financial instruments, various economic entities have begun to adjust the portfolio of their financial assets. On the macro level, this trend reflects a changing mix of financial assets in a country.
The mix of financial assets affects macroeconomic stability and the speed of financial sophistication, and shifts in this mix also provide reference for evaluating the success of economic and financial reform.