Pedestrians walk past a branch of ICBC (Industrial and Commercial Bank of China) in Shanghai, China.

 

Research on the payment and settlement system is fundamental to the study of monetary finance, said Li Yang, former vice-president of the Chinese Academy of Social Sciences (CASS), at a forum in Beijing on March 13 regarding the theories and policies of payment and settlement.
 

At the forum, the China Payment and Settlement System Development Report (2016) was released. This report explored the main issues in payment and settlement at home and abroad from the perspectives of theory, practice and policy.

However, several indexes of the payment and settlement system reveal an obvious alienation between the financial system and the operation of the real economy, Li said.

According to the report, China’s payment system processed transactions totaling more than 4.3 quadrillion yuan ($654 trillion), or nearly 65 times the national GDP in 2015. This means the financial system would have to process transactions worth almost 65 yuan to generate 1 yuan in value, which is up from 53 yuan previous year.
 

And the connection between the indexes of the system and the operation of China’s economy as a whole also weakened in 2015. “It is true that the financial system in China lacks efficiency in supporting the real economy if we look at the trends and data given by the report,” Li said.
 

The report also suggests that rural financial demand for payment and settlement has been constrained by inadequate banking infrastructure. Some scholars suggested exploring ways to utilize the payment and settlement system as a means to alleviate poverty and drive urbanization.
 

Several challenges have been observed in the clearing and settlement system on securities, according to the report. First, the issue of market and information fragmentation persists. Second, supervision and coordination needs to be improved. Lastly, there are institutional obstacles to cooperation between China and other countries.
 

The report suggests that supervision of financial market infrastructure should be coordinated while information sharing and communications between supervisory institutions should be strengthened, and cross-border cooperation between settlement institutions should be promoted.

 

 

 

Wang Chunyan is a reporter at the Chinese Social Sciences Today.