China - Financial Sector Technical Assistance Project

Document of The World Bank FOR OFFICIAL lUSE O)NLY I;>. 4 N Report No. 10072-CUIA a1*)1.. t. .A:;;Y . '. STAFF APPRAISAL REPORT CHINA FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT AUGUST 25, 1992 County-y Operations Division China and Mongolia Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of Augusc 1992) Currency Name - Renminbi; Currency Unit Yuan (Y) $1.00 Y 5.50 Y 1.00 $0.18 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric system ABBREVIATIONS AND ACRONYMS AAPRC - Audit Administration of the People's Republic of China ABC - Agricultural Bank of China ADB - Asian Development Bank ATM - Automated Teller Machine BOC - Bank of China BOCOM - Bank of Communications CFCC - China Finance Computer Company CIB - China Investment Bank CICPA - Chinese Institute of Certified Public Accountants CITIC - China International Trust and Investment Corporation CPA - Certified Public Accountants CPE - Continuing Professional Education CSA - Chinese Society of Accountants DAAA - Department of Accounting Affairs Administration EIS - Electronic Interbranch System GAAP - Generally Accepted Accounting Principles GDP - Gross Domestic Product GNP - Gross National Product GOC - Government of China GOJ - Government of Japan ICBC - Industrial and Commercial Bank of China IMF - International Monetary Fund ITIC - International Trust and Investment Corporation JGF - Japanese Grant Facility MIS - Management Information System MOF - Ministry of Finance NBFI - Nonbank Financial Institution OTC - Over-the-Counter PBC - People's Bank of China PCBC - People's Construction Bank of China PCR - Project Completion Report PICC - People's Insurance Company of China ABBREVIATIONS AND ACRONYMS (cont'd) PPAR - Project Performance Audit Report PRC - People's Republic of China RCC - Rural Credit Cooperative SAEC - State Administration for Exchange Control SEZs - Special Economic Zones SOE - State-Owned Enterprise SPC - State Planning Commission SRC - System Reform Commission STAQS - Securities Trading Automated Quotations System TIC - Trust and Investment Corporation TVEs - Township and Village Enterprises UCC - Urban Credit Cooperative ZACS - Zhonghua Accounting Correspondent School  FOR OFFXICAL USE ONLY CHINA FINANCIAL SECTO ECHNICA CE PROJECT Credit and Proiect Summary Borrower: People's Republic of China Beneficiarvs The People's Bank of China (PBC) Amount: IDA credit: SDR 42.1 million (US$60.0 million equivalent) Terms: Standard, with 35 yeira maturity Proiect Obiectives The proposed project is designed to lay the foundations and Descrintion: for continued financial sector reform by strengthening key elements of financial sector infrastructure. The project will support modernization of the national pay- wn.ts and clearing system and other central bank func- tions in the areas of financial sector regulation and supervision, accounting and internal audit, research and statistics, fiscal agent and monetary policy, and train- ing in economics and banking. The project will further support the government's efforts in modernizing the overall national accounting framework, strengthening its domestic debt management and modernizing the framework for external auditirg. Benefits and Risks: The improved functioning of the financial system would contribute to more efficient mobilization and allocation of savings. A sound regulatory and supervisory system would help to preserve stability in the context of a rapidly evolving financial sector with a larger number and greiter diversity of financial institutions and instruments. Modernization of the accounting and audit- ing framework will give banks and enterprises the tools for more efficient management and facilitate capital market development. A modern payments and clearing system is an integral component of successful economic reform, while a stronger public debt management system and monetary policy function will be conducive to macro- economic and price stability. The risk that financial sector reform will not proceed at a pace required to provide a meaningful project context is mitigated by the expectation that the Government, which has professed a continuing commitment to reform, will feel more confi- dent in taking new refcera measures as macroeconomic stability is sustained. Moreover, since institution building is a long-term process, it is important to lay the ground now for the time when reforms accelerate. To guard against the risk that the project will overtax the This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  absorptive capacity of project beneficiaries, each institution has established effective project management arrangements, while IDA will closely supervise the proj- ect. Estimated Costs: Local Foreign Total - ($ million)