Abstract
Commensurate with its economic strength, China aims for a financial sector and currency of global importance. To assess the likelihood of this ambition in the light of the not fully convertible renminbi and sheltered financial system, this essay reviews past reform efforts and the current state of the Chinese form of capitalism. It finds that after a decade of bold financial reforms under Jiang Zemin and Zhu Rongji, the momentum began to wane from 2005 onwards. The new leadership under ** and Li Keqiang needs to complete important reforms before China’s financial sector and currency can rise to international standards and importance. The new leaders seem to be aware of the historic nature of this task and are willing to close the gaps. In particular this includes introducing market pricing of capital and risk, increasing the breadth, deepness and liquidity of financial markets and improving the institutional framework for financial stability. If successful, these reforms are likely to sustain economic growth in the long term, boost currency cooperation in East Asia and speed up the emergence of a regional RMB bloc.
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Notes
- 1.
- 2.
Discussed in Hess (2010, p. 23). See http://www.gov.cn/gono/gbacontent/2009/content_1303637.htm.
- 3.
In his famous speech of March 2009, Governor Zhou ** the Asian Financial Crisis out of China. Of all top-ranking politicians, who Schmidt met, he attests Zhu the deepest insight into the economy of his country, and puts him with Lee Kuan Yew and Alan Greenspan in the highest category of economic policy-makers. See Schmidt and Sieren (2006, pp. 94–107).
- 10.
At the head of the China Securities Regulatory Commission (see Sect. 3.2), Zhou earned the reputation of being a resolute, market-oriented reformer.
- 11.
Zhu answered this to a Japanese reporter at the press conference after the National People’s Congress (NPC) in March 1999. See Zhu (2009, p. 17, translation by the author). When this book with transcripts of Zhu’s annual NPC press conferences and interviews given to media from around the world appeared in 2009, it soon became a bestseller in China.
- 12.
Ibid, p. 59. A detailed assessment of the restructuring of the Big Four can be found in García-Herrero and Santabárbara (2013, pp. 151–155).
- 13.
As shown by Lieberthal and Oksenberg (1988) in general (see pp. 35–41) and in Hess (2010) for Chinese market infrastructure policy (see pp. 21–27), leadership consensus and the support by the “preeminent leader” (such as Jiang, Hu and today ** illegal and irregular financial behaviour”. See MoF Notice No. 463 (in Chinese only): http://yss.mof.gov.cn/zhengwuxinxi/zhengceguizhang/201212/t20121231_723354.html.
- 27.
- 28.
Ma and Miao (2013) refer to the consensus in China to internationalise its currency, which in their view is driven by a mix of national pride, perceived economic benefits and external demand, as “a commitment device for pushing forward other financial reforms” (p. 191).
- 29.
Cf. Zhongguo Renmin Yinhang (2012), published on the Chinese website of the PBoC and available under http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2012/20120917155836347504341/20120917155836347504341.html. Accessed 19 August 2013.
- 30.
The People’s Bank of China (2013).
Abbreviations
- AMC:
-
Asset Management Company
- CBRC:
-
China Banking Regulatory Commission **银行业监督管理委员会
- CCP:
-
Chinese Communist Party **共产党
- CIC:
-
China Investment Corporation **投资有限责任公司
- CIRC:
-
China Insurance Regulatory Commission **保险监督管理委员会
- CSRC:
-
China Securities Regulatory Commission **证券监督管理委员会
- DRC:
-
Development Research Center of the State Council 国务院发展研究中心
- GITIC:
-
Guangdong International Trust & Investment Corporation
- LGFV:
-
Local Government Financing Vehicle
- LSG:
-
(Central) Leading Small Group **领导小组
- MoF:
-
Ministry of Finance of the PRC 中华人民共和国财政部
- NDRC:
-
National Development and Reform Commission 国家发展和改革委员会
- NPC:
-
The National People’s Congress 全国人民代表大会
- PBoC:
-
The People’s Bank of China **人民银行
- PRC:
-
The People’s Republic of China 中华人民共和国
- PSC:
-
Politburo Standing Committee 政治局常务委员会
- RC:
-
Regulatory Commission
- RMB:
-
Renminbi
- SAFE:
-
State Administration of Foreign Exchange 国家外汇管理局
- SDR:
-
Special Drawing Rights
- SME:
-
Small and medium enterprise
- SOE:
-
State-owned enterprise
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Notes and Acknowledgments
The views expressed here are solely those of the author and do not necessarily reflect those of the ECB. The author is grateful to David Lodge, Livio Stracca, Frank Rövekamp and Hanns Günther Hilpert for their comments. All mistakes are entirely his own.
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Hess, P. (2014). China’s Financial System: Past Reforms, Future Ambitions and Current State. In: Rövekamp, F., Hilpert, H. (eds) Currency Cooperation in East Asia. Financial and Monetary Policy Studies, vol 38. Springer, Cham. https://doi.org/10.1007/978-3-319-03062-3_2
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