Experts elaborated on China’s financial reforms at a forum in Beijing, the fifth of a series by the Chinese Academy of Social Sciences (CASS) marking the 40th anniversary of reform and opening up.

Li Yang, chairman of the National Institution for Finance and Development, said that the most prominent feature of China’s economy over the 40 years has been the continued harmonious co-existence of high savings, high investment and rapid growth.

In developing countries, two bottlenecks restrict development, Li said. Internally, there are savings gaps, which is to say insufficient domestic savings makes it difficult to support large-scale investment in the long term. Externally, a foreign exchange gap makes it difficult to attract foreign investment and support domestic economic growth.

Beating the double gap is the key for developing countries to get rid of poverty and backwardness and ultimately achieve modernization. As such, effectively mobilizing savings, supporting high-level investment, starting industrialization and urbanization, and ensuring the employment of a growing working-age population have become paramount tasks throughout China’s reform process. In this respect, China’s financial development has contributed wisdom to the world, Li concluded.

Li pointed out that preventing and defusing financial risks and removing obstacles to future development are the premise for the future Chinese financial industry. These tasks are highly complex, and spillover from the 2008 international financial crisis has made them even more burdensome. The source of financial risk is high leverage, so de-leveraging is also a core task now and in the future. However, in view of its complex structure, large volume, wide coverage and strong spillover effects, de-leveraging requires careful consideration, timing, rhythm, pace and the coordination of various departments.

Fundamentally speaking, China’s financial industry aims to build itself into a leading financial power. To this end, interest rate and exchange rate marketization must be further reformed, thus improving the market foundation of China’s finance. Inclusive finance needs to be encouraged, improving the coverage of financial services. Financial science and technology innovation should be facilitated, comprehensively transforming the traditional financial industry and solving problems with new technologies. China must actively and steadily promote the internationalization of the RMB and participate in the reform of the international economic governance mechanism, Li suggested.

Li also singled out the need for green finance to be advanced to support the sustainable development of the economy.

Green finance not only refers to the protection of the ecological environment and the treatment of environmental pollution, but also includes the development concepts of green production, green consumption and green innovation, said Liu Shijin, deputy director of the Economic Committee of the 13th CPPCC National Committee.

Liu also said that China’s financial reform needs to break the monopoly of the financial market and improve operational efficiency. Reform should address the financing difficulties facing small businesses. Furthermore, industrial transformation and upgrading should receive effective financial support, Liu suggested, adding that local governments must play an active role in financial reform.

The next step in China’s financial development is shifting from high-speed to high-quality growth, said He Dexu, dean of the National Academy of Economic Strategy at CASS. As such, a modern financial system needs to be built, including a financial regulation system, a financial organization system, a financial market system, a financial supervision system and a financial environment system.

Huang Qunhui, director of the Institute of Industrial Economics of CASS, said that the development of the real economy is inseparable from support of the financial industry. The financial industry plays an important role in serving the real economy and in the optimal allocation of resources. Industrial upgrading and technological advancement will also promote the development of financial technology. The two reinforce each other.

It is necessary to deepen the reform of the financial system and enhance the ability of financial services to serve the real economy, Huang suggested. The financial system plays an important role in facilitating economic transformation, optimizing industrial structure and sparking technological innovation.

 

(edited by JIANG HONG)