China’s fi­nan­cial re­forms ‘not tough one’

China Daily (Canada) - - ACROSSAMERICA - By LIU CHANG and CAI CHUN­Y­ING in Wash­ing­ton

Spring time in Wash­ing­ton means the an­nual meet­ing of the World Bank and In­ter­na­tional Mon­e­tary Fund, and some of the world’s leading fi­nan­cial fig­ures gath­ered on Thurs­day for a dis­cus­sion on China’s fi­nan­cial re­forms and their im­pact on the world.

Yi Gang, deputy gover­nor of the People’s Bank of China, told a packed room of econ­o­mists and China ex­perts that China’s fi­nan­cial re­forms in­clude three as­pects: Open­ing the coun­try’s mar­ket do­mes­ti­cally and in­ter­na­tion­ally, mar­ket re­form, and strength­en­ing fi­nan­cial reg­u­la­tion, as de­fined in last year’s Third Plenum.

“Over the past 35 years, China has been en­gag­ing in all fac­tors of re­forms, among which the fi­nan­cial sec­tor is a very im­por­tant one,” said Yi, who also serves as di­rec­tor of the State Ad­min­is­tra­tion of For­eign Ex­change.

Yi made his com­ments as a pan­elist at a fo­rum spon­sored by the School of Ad­vanced In­ter­na­tional Stud­ies (SAIS) of John Hop­kins Univer­sity.

To Li, China’s fi­nan­cial re­form is not the tough one.

“China’s fi­nan­cial re­form is one of the eas­i­est re­forms, com­par­ing with traf­fic con­trols and property tax is­sues; fi­nan­cial re­form is tech­ni­cal,” said Li, adding that fi­nan­cial re­form mainly in­cludes the re­form of commercial banks and cap­i­tal ac­count con­vert­ibil­ity.

Yi, how­ever, ac­knowl­edged that there are some dif­fi­cul­ties with China’s fi­nan­cial re­form. He said lib­er­al­iz­ing in­ter­est rates faces a chal­lenge brought by some mi­cro foun­da­tions that are not ready, which mean some firms and cor­po­ra­tions are not re­spond­ing to in­ter­est rates.

“Fi­nan­cial re­form should si­mul­ta­ne­ously push for­ward in­ter­est rates, ex­change rates and cap­i­tal ac­count con­vert­ibil­ity,” said Yi, who ob­tained a PhD in eco­nom­ics from the Univer­sity of Illi­nois in 1986 and taught at In­di­ana Univer­si­tyPur­due Univer­sity In­di­anapo­lis (IUPUI) for a few years be­fore re­turn­ing to China.

He stressed the pro­found trans­for­ma­tion that he said Chi­nese banks have gone through in re­cent years.

“It is amaz­ing that 15 years ago China’s en­tire bank­ing sec­tor was on the verge of bankruptcy. But now four or five of the world’s largest banks in terms of as­sets, cap­i­tal and profit are from China,” said Yi, who is at­tend­ing the World Bank and IMF meet­ing in Wash­ing­ton.

Yi’s com­ments were echoed by Stephen Sch­warz­man, chair­man of Black­stone Group, who also was on the panel.

“Chi­nese banks are in­cred­i­bly large and prof­itable,” Sch­warz­man said, adding that “Chi­nese banks are also tightly con­trolled be­cause they are so cen­tral to the Chi­nese econ­omy.”

He said it would be very in­ter­est­ing to see these large Chi­nese banks step out of their ter­ri­to­ries in China and start ex­plor­ing the global mar­ket.

Sch­warz­man has set up the $300 mil­lion Sch­warz­man Schol­ar­ship at Ts­inghu Univer­sity to at­tract stu­dents from other coun­tries to study and gain a deep un­der­stand­ing of China as fu­ture world lead­ers. Con­tact the writ­ers at changliu@chi­nadai­ and charlenecai@chi­nadai­lyusa. com

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From left: SAIS pro­fes­sor Pi­eter Botel­lier, Ts­inghua Univer­sity pro­fes­sor David Li, Deputy Gover­nor of People’s Bank of China Yi Gang and Black­stone Group Stephen Sch­warz­man lis­ten to a ques­tion from the au­di­ence dur­ing a fo­rum event at SAIS in Wash­ing­ton on Thurs­day.

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