With the opening of many sectors to

With the opening of many sectors to foreign competition, it is expected that numerous state companies will either have to rise to the occasion and compete successfully or close. The state sector is supported by the banking system, which carries a high burden of non-performing loans. Serious banking reform is therefore necessary to avoid a major crisis. The experience of the Asian crisis brought this point home for many in China, and created a sense of urgency. With WTO membership, foreign companies and banks would increase their presence in the Chinese market, setting examples and creating competition for the domestic system.