Abstract

China's state-owned banks in the transition process remains a soft budget constraints, and eliminate a large number of non-performing loans do not have to establish the mechanism. Soft budget constraints of commercial banks is not the transition economies face a particular phenomenon, but the state-owned commercial banks are showing a soft budget constraints of its own special characteristics and formation mechanism. Soft budget constraint distorted banks to act to increase the financial burden, reducing the control efficiency Monetary policy, central bank independence and the stability of the entire financial system, and thus hampered the reform process of China's financial market, impeding accurate financial markets into the market and interest rates. Policy orientation, the reform of state-owned commercial banks should make joint-stock commercial parallel with the reform calls for the gradual introduction of progressive foreign equity participation, and gradually reduce the concentration of credit interest rate market and progress towards the road. The state-owned commercial banks maintain the soft budget constraint and do not establish the mechanisms to remove the unhealthy loan in the process of transition. The SBC of China's state-owned commercial banks not only has its own characteristics and occurring mechanisms but also exert great influences in banking system, public finance, monetary policy, and financial market. The reform of China's state-owned commercial banks in system is an evolutionary process, which includes establishing the shareholding system and market-oriented operation