52Access to finance by state-owned or controlled banks has also been a key tool of economic policy. As Wright and Rosen observe, “controlling the flow of credit has been virtually the raison d’etre of China’s political system for almost half a century.”53The state has used credit growth to fuel economic expansion and limit any economic recession so far. Control over access to finance is exercised in China through Central Huijin Investment Ltd. (a subsidiary of China’s sovereign wealth fund, the China Investment Corporation), which has a controlling stake in China’s largest four banks as well as a majority stake in smaller second-tier commercial banks. Chinese banks account for over 80 percent of all assets in the Chinese financial system, which at $38.4 trillion is three times the size of China’s GDP in 2017.54For a point of comparison, the existence of an equivalent to Central Huijin Investment Ltd. in the U.S. would be like the U.S. Treasury controlling JPMorgan Chase, Bank of America, Citibank, and Wells Fargo.5547 The Economist. “China’s state enterprises are not retreating but advancing.” The Economist,July 20, 2017. leaders/2017/07/20/chinas-state-enterprises-are-not-retreating-but-advancing.48 The Economist. “China’s private sector faces an advance by the state.” The Economist,December 8, 2018. business/2018/12/08/chinas-private-sector-faces-an-advance-by-the-state.49 Scissors, Derek. “China’s SOE Sector is bigger than some would have us think.” American Enterprise Institute East Asia Forum. May 17, 2016. .org/publication/chinas-soe-sector-is-bigger-than-some-would-have-us-think/.50 Bremmer, Ian. “How China’s Economy is Poised to Win the Future.” Time, November 2, 2017. -poised-to-win-the-future/.51 The Economist. “Are China’s state giants reformable?” The Economist,March 1, 2018. -state-giants-reformable.52 Wu, 272.53 Kennedy, Scott, Daniel H. Rosen, and Logan Wright. Credit and Credibility: Risks to China’s Economic Resilience.Washington, DC: Center for Strategic and International Studies, 2018. 9. .54 Ibid. 6.55 Wu, 274.
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The US-China economic relationship: A comprehensive approach 15The CCP also controls SOEs through the Central Organization Department which has the power to appoint the head and management of SOEs, overriding the corporate function of boards.56In fact, the heads of SOEs are all CCP members and carry a CCP rank commensurate with their role. In addition, both SOEs and private companies must establish a Party Committee comprising three CCP members. While its usually unclear how these Party Committees work or their role, they create an appearance of ongoing CCP influence over companies.
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