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In the Monetary Economic Age, banking industry is permanent, but banks are not everlasting. The structure and function of a bank should reform continuously according to the economical developments. Therefore, the financial (banking) system would differ in its structures and functions to fit in with different time, places and economic developments. In 1979, Deng-Xiao-Ping took a new economic strategy based on China¡¦s relative benefit (open up export processing zone; take advantage of cheap labor) and import market-oriented economy system. He hoped to transit from planned economy to market economy step by step. We found several changes happening in China in this study. (1)Financial system became diversified gradually. The unitary banking system set by Mao-Ze-Dong can no longer meet the need of economic developments. The functions of the bank become more and more complex, and should be divided into several departments. Hence, the China People Bank simplified its business to focus on implementing independent monetary policy. The four main state-owned banks were transformed into real commercial banks which were hold by shares and provided large capital needed by companies. Policy banks were also set up to provide capital needed by policy construction. Financial system became very diversified. (2)Banks can distribute its credits loaned to customers independently. Banks followed the reform pattern of state-owned enterprises, enhancing the quality of its credits and risk management of the integrity of its owners. China government enforced various kinds of new financial regulation accordingly to make the banks to operate by laws and take responsibility of its operating results. (3)Achieve efficiency of distribution of capital by separating political affairs from business. Market-oriented economic system achieves the optimal efficiency of capital distribution through market mechanism. In order to eliminate the influence of political power, China People Bank takes the reforms in 1979. However, it is not practical to expect political power to be smooth away from banks operation. Since many owners of banks still took the party position. (4)To open up and actively take part in the international society: After economic reforms, to cope with deteriorating domestic environment, and maintain the infrastructure of agriculture development; China needs to learn form foreign experience and borrow foreign capital. Not only import the foreign direct investment (FDI), participating international financial institutions, but China needs to face the challenges of internationalization. In 1997 when Asian financial crisis happened, China took a series of necessary measures to avoid getting involved. In 2001 December, China got the permission to join World Trade Organization (WTO), which means the reforms of China entered a new stage¡Ð taking all financial activities under the regulations of WTO, and caused deep effect on relationship between China and the States. The states changed fom cooperating with Japan to stop China from becoming an emerging hegemonist in Asia to helping China with its economic transformation which encouraged China to further integrate into the world. The transformation of a financial system is like that of an economic system. Adversities and challenges are unavoidable. As a china economist once said,¡¨ There are two different futures of reform in front of us: One is market economy under political civilization; another is privatization. This is like the spring of the hope, and winter of the disappointment. We are stepping toward the heaven, but also probably going in the other direction.¡¨ The financial reforms of China is on the way that can¡¦t turn back. It is still worth our while to observe its development closely and figure the solutions.

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