On September 23, 2017, China Finance 40 Forum (CF40) released the 2017 Jingshan Report in Hangzhou, Zhejiang Province. The theme of the report was Actively and Prudently Open up China's Financial Sector.
China now is faced with the need to further open up its financial sector. At the latest National Conference on Financial Work held in July, President Xi Jinping emphasized that the opening-up of the financial industry is an important part of China's reform process. Against this backdrop, CF40 initiated a research project to comprehensively analyze China's financial opening-up process and formulate policy proposals.
The research team consist of officials from the People's Bank of China (PBC), former IMF economists, and leading experts from the academia, including Huang Yiping, Chairman of CF40 Academic Committee and Deputy Dean of National School of Development at Peking University; Zhang Yuyan, Director of the Institute of World Economics and Politics at Chinese Academy of Social Sciences; Zhu Min, CF40 Academic Adviser and Chairman of the National Institute of Financial Research at Tsinghua University; Xu Zhong, Director-General of the PBC's Research Bureau; Zhu Jun, Director-General of PBC's International Department; and Zhang Bin and Guan Tao, both CF40 senior fellows. The experts participated in the research in their personal capacity and introduced their findings at the release event.
The report points out that China’s financial liberalization lags behind the development of the real economy and the process in many other emerging markets. Financial opening-up is key to achieving sustainable economic growth, conducive to financial innovation, and an important means to prevent and control systemic financial risks. Moreover, it is also an important channel for China to participate in international economic governance. Therefore, the government needs to actively and prudently push forward financial opening-up while striking a balance between efficiency and stability.
Specifically, the report proposed the following policy recommendations –
- The Financial Stability and Development Committee of the State Council should coordinate financial reform and opening up policy.
- Actively increasing the flexibility of the exchange rate, and let the market determine the exchange rate level.
- Establishing cross-border capital flow management frameworks at both macro and micro levels, and steadily accelerate RMB internationalization.
- Implementing pre-establishment national treatment on foreign financial institutions, relaxing the restriction on foreign ownership of domestic financial institutions.
- Adopting international market rules and practices to achieve a higher level of financial opening.
- Actively build mechanisms for overseas direct investment and financing activities.
- Improving the macro-prudential regulatory framework to match an open financial system, effectively preventing and controlling financial risks.
The experts suggested that when formulating new policies, the government needs to have a full appreciation of economic reality and adopt proper guiding principles and strategies. For example, as a large economy, China’s policy could have great spillover effect on the rest of the world. And while pushing forward liberalization of the capital account, a proper and temporary management mechanism for cross-border capital flows is needed to ensure financial stability and the independence of monetary policy. In addition, it is important to coordinate reform and opening-up to support and facilitate each other’s progress.
CF40 Secretary-General Wang Haiming moderated the release event.
