Zhu Jun
CF40 Member
Director-General, International Department, the People's Bank of China
I have several things to elaborate together with the response to the previous speakers. The first thing is that for the financial opening-up, I think China has done a lot in the past few years. We also noticed the difference between the official self-recognition and market’s feedback. Also, I noticed several suggestions by the four foreign banks mentioned just now.
I think for us the principle is very simple. We stick to the financial opening-up in line with three principles. The first one is the fair competition, that’s the level playing field. In other words, it means the pre-establishment of the national treatment. For us, the first thing to review in opening-up is to check whether the foreign institutions are equally treated comparing with the domestic institutions. That is the first thing we have to do. This is also the so-called market orientation of the financial opening-up.
The second principle is the internationalization of the financial markets. Almost all the four speakers from foreign banks mentioned this principle. We think it is quite important for us because now Chinese financial system is pretty large, but we cannot say it is very strong. We’d like to invite more foreign banks into the Chinese market to encourage competition and innovation. We would like the foreign banks to inform us of the gap between Chinese practices and international best practice. This is the direction we will push forward in the future.
The third principle would be the more sound legal and compliant system for the financial system in China. Actually, I think following the opening-up in the past decades, we have revised the regulations or laws on foreign banks, foreign security firms, and foreign insurance companies. But there are still a lot of things to do.
And I also noticed the Chairs from the Goldman Sacks and HSBC simultaneously mentioned the legal gaps in Chinese markets. And we think it is a very serious issue. The PBOC together with the CBIRC, CSRC and also the SAFE are working together to try to minimize the gap between China and the international standards. This is regarding the opening-up.
Actually, the opening up is mainly focused on the market access. Now for the banking, insurance and securities industry, all the market access has been liberalized. But I think the next challenge for China is the reform of its financial system.
This is related to the suggestions the previous speakers mentioned just now, such as reducing the controls on cross-border capital flows, and how to increase the declining share of the foreign companies in China’ s financial markets, and how to internationalize the regulatory standards in China.
This is not only an opening-up issue but also a reform issue. It is related to a lot of operational issues in China’s financial market. It is related to the accounting standards, auditing standards, legal framework, and some other areas of the whole industry. We realized the importance of all of these reforms. And we are trying our best to do some improvements in these areas.
The third issue is that as Governor Yi has mentioned this morning, the financial opening-up in China has simultaneously promoted market access of the financial industry, the RMB exchange rate reform, and the internationalization of the currency.
It is a very important experience of the financial opening-up in the past decades for China. Also, it would be the future opening-up direction in the future. Regarding the RMB internationalization, actually we have had a very comprehensive review in this area recently.
We are re-considering the strategy for the internationalization of the currency. As everybody knows in the past, the internationalization of RMB sticks to the market principles. That means market will decide everything. The role of the authorities mainly focused on removing the policy obstacles for the free use of the currency.
At this moment, we think there are some kind of complication of the domestic and overseas situations. And for the future internationalization of the currency, of course we will stick to the market orientation. But at the same time, maybe the government can be more proactive to facilitate the role of the markets.
We can do this in two ways. First, authorities can try to improve policy support to the RMB internationalization. That means the PBOC can try to improve the bilateral swap agreements network to better facilitate trade and investment.
We can also try to coordinate various means of RMB cross-border settlement and payment infrastructure to increase the coverage of the network. We will also continue to deepen the role of off-shore markets and to create a level playing field for the cross-border electronic payments, to help the RMB internationalization. This is the whole policy support for the RMB internationalization.
On the other hand, what the authorities can do is to deepen the reforms, to remove the existing obstacles for the RMB internationalization, to facilitate the market’s role, such as the steady capital account liberalization which is related to the suggestions mentioned earlier, to increase the RMB exchange rate flexibility by overcoming the fear on the flexible exchange rate, to do something on the bond market reform, to improve secondary market liquidity, to try to establish a better government-bond yield curve which has more market information.
There are a lot of operational issues in the financial sector together with what I have mentioned just now. There is a long list for us to do in the future. Not only the financial opening-up, but also the financial reforms. Usually the reform is more challenging compared with the liberalization of market access. We hope the foreign banks, foreign financial institutions, can give us good advises in this area.
The final thing is on the complicated business environment, as the Chair of HSBC mentioned recently. We have noticed that. There are some new areas that Chinese financial institutions and foreign financial institutions can cooperate, that is the green finance to facilitate the climate change financing. We’ve already had very good practices and examples in this area.
I believed that HSBC and Standard Chartered both joined the so-called green investment principles under the Belt and Road Initiative sponsored together by the PBOC. This kind of practice is quite innovative. It will help both the financial institutions in China and outside of China to find new ways of cooperation. Thank you.
