China's financial system urgently needs ‘transformation’

Source:Global Times Published: 2018/9/16 20:33:39

Financial system urgently needs ‘transformation’

Chinese authorities should give the market a more decisive role in the allocation of financial resources and expand the role of a multi-layer capital market while also devising a supervisory framework to guard against systemic financial risks, said a report released by Beijing-based think tank China Finance 40 Forum over the weekend.

"China's financial system, which successfully supported a production element-driven economic growth model, is now in urgent need of transformation as it can't sustain innovation-fueled economic development," said Huang Yiping, member of the central bank monetary policy committee and an economist at Peking University.

Huang pointed out that China's financial system, during the past four decades of reform and opening-up, has focused "too much on scale and too little on a mechanism."

Such a system functioned very well for a labor-intensive manufacturing economy, but as China's economy shifts to quality growth, the system's financial efficiency is declining and risks are rising. This calls for a transformation, and the report urged financial regulators to roll out policies that support innovation and industrial upgrading, as well as the commercialization of the banking sector.

Another pressing issue for the financial system is a lack of clarity about the boundary between the government and market, according to the report. Market-oriented financial reform has been carried out "very slowly" in China due to the government's dual targets of boosting growth and maintaining stability, according to Huang.

Newspaper headline: Financial system urgently needs ‘transformation’

Posted in: ECONOMY

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