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China and US Banking Strategy Audit: The Differentiating Factors by Student’s Name Code + Course Name Professor’s Name University Name City, State Date
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China and US Banking Strategy Audit: The Differentiating Factors Chapter 1: Introduction 1.1.Background of the Study US and China are arguably the two biggest economies in the world (Elliott & Yan, 2013). The success or failure of the two countries can be traced back to their banking systems strategies. Today, China are playing a bigger role on international ground making its financial institutions a subject for scrutiny from international bodies, as well as, US based firms. The main question is whether the United States is on a moral high ground to point fingers at China banking system given the recent 2008 financial crisis as a function of US financial institutions. Nonetheless, China is not an entirely sound system, it’s flawed in its own way, and andfailures can be traced from one point to another. According to Brand Finance, China two banks, The Industrial and Commercial Bank of China – ICBC and China Construction Bank are now the most valuable banks in the world since 2018. This means that even in the wake of 2008 financial crisis, the banks in China have remained stable and even enjoyed a robust growth. This further necessitates a need to understand both strategies employed by institutions from both countries to determine how roles, operations and competencies differs among them. For any country, banking institution plays a bigger role in economic growth and expansion. Barely a few decades ago, China private banks did not even exist. Everything from transaction to banking services were done by state owned enterprises. Today, China has grown into an enormous economy with very strong banks at the top. China banks provide three fifths of the national total credit whereas in US, non-banking institutions and financial markets provide more credit than banking firms. To exert such level of control, China banks have been accused of
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being state owned enterprises hence exerting more unfair practices in the banking market. Protectionism from the government means that Chinese private banking sector is not a free market hence policies are government regulated and lending capacity is enhanced by the government. Between the two countries, the US has a more sophisticated baking ecosystem with banks contributing less than 48% to the GDP while in China, banks contribute 128% of the country’s GDP(Elliott & Yan, 2013). With such contribution, the Chinese government is forced or prompted to get involved more in banking operations. This alone has created room for several accounting frauds as local governments keeps giving incentives to cover up failures of their institutions. For instance, manipulation of accounting details in China is not new, Muddy Waters has reported over 20 cases of accounting fraud among Chinese firms (Elliott & Yan, 2013).
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  • Summer '18
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