The banking sector may include the way the banking system operates, different types of banks, the main users (savers and borrowers), again if there are any constraints whatsoever on ownership and as well as the role played by the country’s central bank.The financial markets and banking system in China is indeed a vast topic and will be quiet different from developed, developing, transitional, and emerging countries. The focus will be on the role of financial institutions as intermediaries for their users, which includes investors, firms, and government – and not to try to construct a detailed description of the contracts and operations in which they engage and the legislation in place.China’s current financial system is dominated by a big banking sector that is quite inefficient. In order to reform the Chinese financial system sooner, there has to be a drastic reduction in the number of non-performing loans amongst the major banks to a normal level. This is a vital objective for the success of any reformation. Although the growth of the stock market in China has been rapid, its role in the allocation of resources has been ineffective and limited in the country’s economy. Further development of China’s financial markets happens to be the most important long-term object. For sustainable stable economic growth, China should strive to halt or prevent any damaging financial crises, as well as a banking sector crisis, a “twin crisis” in the currency market and banking sector, and a stock market or real estate crash.In the financial market sector, speculation and insider information has characterized the Chinese Financial markets and have not been very successful in the effective allocation of resources as the banking sector. The Shanghai Stock Exchange (SHSE hereafter) and Shenzhen Stock Exchange (SZSE hereafter) all established in 1990, are China’s two main financial markets and have been growing at a tremendous rate. But they have not been working a rate that can bring in some improvements in the Chinese financial market sector.