At that time, there existed large deficiencies in the standards of accounting, information disclosure and financial statements reporting. Enterprises’ access to credit was largely based on their management’s personal relationship to the banks, and only those with good relationship got the loans. Rectifying China’s unsound credit culture has been a long and painful process.
A key step on this path was the nation’s first National Financial Work Conference held in November 1997, which set out a vertical management system for the commercial banks. Both the central and local governments were thus prohibited from interfering with loan decisions. This change was considered an important step forward in transforming the credit culture.