China Financial Reform: Think tank calls for market mechanisms to play bigger role

World
Europe

02:23

A new report is out analyzing China's economic reforms. China Finance 40 Forum - a non-profit composed of 40 experts around 40 years old - focused on market mechanisms and says more changes are needed. CGTN's Wu Lei explains.

The financial sector has played a key role in supporting China's manufacturing growth in recent decades. But experts say the current financial system is not well-suited to upgrading the country's industrial base. Professor Huang Yiping, who led the Jingshan Report, says a modern financial system is needed.

HUANG YIPING, CHAIRMAN CF40 ACADEMIC COMMITTEE "What we really need to do is to restructure the financial sector in order to support the economic innovation, industrial upgrading so that manufacturing can continue to rise."

Although China has been speeding up its financial reform since 2015, Professor Huang said today many banks need to take measures to help small and medium sized companies solve their funding difficulties. And more regulations are needed to cover small and unqualified financial institutions.

HUANG YIPING, CHAIRMAN CF40 ACADEMIC COMMITTEE "But at the same time when the market is freed up, although on the one hand, efficiency will rise, but on the other hand, risks may also increase. So liberalization has to be accompanied by better regulation."

Generally there are two major financial systems: market-oriented and bank-oriented. Each has different advantages and disadvantages.

YIN JIANFENG CF40 MEMBER "The banks account for about 80 percent of China's financial institutions' assets, while in Japan and Germany, the number is only 50 percent. So China has been a heavily bank-oriented system for years."

So these experts from the CF40 suggest China should turn to market-oriented financial systems to prevent systemic crisis.

WU LEI HANGZHOU "Figuring out how to make the financial system better serve the real economy, while also allocating resources, have become key challenges to the country's economic growth. Experts say China needs to continue to reform its financial sector and let the market mechanism play a bigger role in boosting sustainable growth. WL, CGTN, HZ."