Long road to financial sector innovation

By Yang Qingqing Source:Global Times Published: 2013-2-17 18:33:01

Financial innovation is inevitable when deepening financial reforms and realizing financial modernization.

Over the past two decades, China has made great achievements in the innovation of financial services and instruments. But major gaps still exist between China and developed countries. Finding ways to adapt to international financial markets and achieve success in international competition has become an important task.

First, we must break traditional thinking models and management styles, and actively encourage innovation.

We have copied too much in terms of financial innovation while developing little original content, and innovated products and services fail to have the desired long-term effects. We need more time to familiarize and understand the experiences and models of other countries before we can find a path of originality that combines rational introduction and independent innovation.

Second, financial innovation must aim to better serve the real economy and improve modern financial systems for the real economy's development. Though financial innovation starts with the need to continually satisfy the market, many innovations in China deviate from the purpose of serving the real economy.

Some products and services are modified simply for profit and market expansion. When these new financial instruments or services are popular in the market, almost every financial institution crowds around to copy or transplant them.

Third, financial systems and institutional construction must be innovated to create a better external environment for financial development. 

At present, with many policy-oriented measures, China's financial systems and regulation patterns are concentrated. Legislation of the financial market needs improvement before China's system can be integrated with world systems.

Despite the difficulties, China has advantages. Since China is evolving from planned finance, which had relatively centralized control, into free market finance under a level of control, the space for financial innovation is vast.

However, because the entry of foreign institutions has intensified competition, China's finance has to confront this challenge.

China will innovate its financial sector by constantly learning from lessons and experience, and paying more attention to the training of financial talents, as well as perfecting its risk supervision system.

The author is a project supervisor of European finance of the Chongyang Institute for Financial Studies, Renmin University of China. opinion@globaltimes.com.cn

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