The logic of building a financial power under socialism with Chinese characteristics

Editor's note: Lin G. is a CGTN economic commentator. The views expressed in this article are the author's own and do not necessarily reflect those of CGTN.

China's pursuit of becoming a financial power begins from a premise that sets it apart from prevailing Western orthodoxy: finance is not an arena for private interests, but a strategic instrument that must advance collective prosperity and national development.

In liberal economic thought, financial markets are guided by private incentives and the so-called "invisible hand." By contrast, China's institutional logic holds that the effectiveness of financial governance is not measured by efficiency alone, but by whether finance serves the majority, addresses developmental imbalances, and contributes to long-term national goals.

The creation of the Central Financial Commission and the Central Financial Work Commission is emblematic of this reorientation. Far from being mere bureaucratic reshuffles, these institutions embody a system in which political leadership is designed to anchor finance firmly within the broader mission of modernization.

Institutional logic: From the Party's leadership to financial governance

What does "strengthening the centralized and unified leadership of the Party" actually mean in the context of finance? At its core, it is about ensuring that financial development serves the interests of the many rather than the few. Unlike in some systems where elites may capture financial resources for private benefit, the Party's leadership is designed and institutionalized to prevent such capture.

The effectiveness of governance is judged by whether the system delivers broad-based benefits. In this sense, financial governance under socialism with Chinese characteristics transforms institutional authority into collective outcomes. Financial resources should be mobilized to promote common prosperity and strengthen the real economy.

This is where the contrast with Western economic thinking becomes sharp. Mainstream economics in advanced economies tends to assume self-interest as the starting point of behavior, with efficiency defined by welfare maximization under market allocation. But efficiency so defined often neglects equity: if some individuals accumulate far more resources than they can productively use while others are left without access, aggregate welfare may appear maximized, yet the distributional reality undermines social fairness.

China's institutional logic instead integrates fairness into the measurement of efficiency. The effectiveness of the financial system is not simply about capital returns, but about whether financial resources are allocated in ways that serve broad development, balance disparities, and sustain long-term growth.

China's socialist financial system excels at concentrating resources to achieve major objectives

This orientation is further reflected in the call for finance to vigorously support national strategies and address weak links in economic and social development. The phrase encapsulates the principle that finance in China does not operate as a neutral, market-driven mechanism. Instead, it is directed, with purpose and orientation.

Western financial systems often channel resources toward projects with the highest returns. Large, long-gestation investments – such as infrastructure or strategic technologies – are often deemed unattractive because they require massive upfront capital and yield returns only in the distant future. Similarly, sectors or regions considered "weak links" may be excluded because they appear "inefficient" in the narrow sense.

China's financial system, however, is organized precisely to overcome these shortcomings. Through the Party's centralized leadership, national strategies are prioritized and financial institutions, especially state-owned ones, are guided to channel credit and investment where it matters most for long-term development. This is the embodiment of the principle of "concentrating resources to accomplish major tasks."

For instance, strategic initiatives such as high-speed railways and rural revitalization may not fit short-term market logic but are crucial for the nation's structural upgrading and balanced growth. By mobilizing finance in these directions, China ensures that resources flow not just to where returns are highest, but where national needs are greatest.

It should be recognized that efficiency is not a static condition but a dynamic one. Investing in weaker links, whether underdeveloped regions or small and medium-sized enterprises, can transform them from inefficient to efficient. When weak links are strengthened, the overall economy becomes more resilient, supply chains become more complete, and social cohesion is enhanced. This is an efficiency that the narrow metrics of Western economics often fail to capture.

The synergy between "visible leadership" and "invisible hand" underpins China's economic effectiveness

As China advances toward the goal of becoming a financial power, its path diverges meaningfully from the models familiar in the West. The divergence between China's and the West's financial governance logics can be understood as a difference between the "invisible hand" and the "visible leadership."

China's paradigm does not deny market forces but situates them within a broader framework of guidance and leadership. This is not a rejection of efficiency but a redefinition of efficiency in terms of fairness, sustainability, and national development goals.

China's financial modernization, therefore, is not about mimicking Western pathways but about constructing a distinct, purposeful, and inclusive model. It is this logic – deeply rooted in the institutional advantages of socialism with Chinese characteristics – that underpins the vision of building a true financial power.