And financial systems everywhere are more globally connected than they once were, so the potential pressures on the Chinese system are greater than when Australia went through reforms. From my perspective though, a number of the discussions that are occurring today regarding the Chinese financial system have a degree of familiarity about them.4 I would like to mention three of these.
The first is the discussion about “shadow banking”. This is very familiar. In the 1970s, Australia had a highly regulated banking sector – with regulations on interest rates, the rate of bank balance sheet growth and structure of those balance sheets. The result was rapid growth in other types of financial institutions.