Econ­o­mists call for deeper re­forms

China Daily (Canada) - - SHANGHAI - By WU YIYAO in Shang­hai

Fol­low­ing a year where sev­eral “black swan” events and cap­i­tal mar­ket fluc­tu­a­tions took place, China’s eco­nomic growth in 2017 will face un­cer­tain­ties and chal­lenges, and this should be a mo­ti­va­tion for the na­tion to fur­ther in­no­vate and reform its fi­nan­cial mar­ket, said macro econ­o­mists dur­ing the re­cent Shang­hai Fi­nance Fo­rum.

Hosted by Shang­hai Ad­vanced Fi­nance In­sti­tute (SAIF) and held at the Shang­hai Jiao Tong Univer­sity, the fo­rum gath­ered econ­o­mists from around the world to dis­cuss about the ma­jor chal­lenges that China’s fi­nan­cial mar­ket is fac­ing, in­clud­ing reg­u­la­tory un­cer­tain­ties in the fi­nan­cial tech­nol­ogy sec­tor (Fin­Tech), A-share mar­ket volatil­ity, for­eign ex­change rate fluc­tu­a­tion and the pres­sures that arise from re­form­ing eco­nomic growth pat­tern.

Wang Jiang, Mizuho Fi­nan­cial Group Pro­fes­sor at the Sloan School of Man­age­ment, said that China’s switch from a scale-ori­ented and gov­ern­ment-led growth pat­tern to an ef­fi­ciency-fo­cused and mar­ket-ori­ented one will in­her­ently re­quire a greater de­gree of open­ness in the sys­tem.

“The key of this reform is to truly let the fi­nan­cial mar­ket play the de­ci­sive role in al­lo­cat­ing re­sources and risk man­age­ment, and this role must be sup­ported by a mod­ern, open fi­nan­cial sys­tem,” said Wang.

Robert Mer­ton, School of Man­age­ment Distin­guished Pro­fes­sor of Fi­nance at MIT Sloan, said that China would find its own prac­tice to achieve an “eco­nomic nir­vana” through in­no­va­tion. For ex­am­ple, Fin­Tech can be re­garded as the fu­ture of

The key of this reform is to truly let the fi­nan­cial mar­ket play the de­ci­sive role in al­lo­cat­ing re­sources and risk man­age­ment.”

fi­nan­cial and tech­no­log­i­cal in­no­va­tion, and can play a sig­nif­i­cant role in China’s fi­nan­cial sys­tem should it be able to build trust among in­vestors, reg­u­la­tors, and fi­nan­cial ser­vices providers.

Re­vamp­ing the cur­rency pol­icy frame­work should also be in­cluded in the fi­nan­cial mar­ket reform, said Zhu Min, pres­i­dent of Na­tional Fi­nance Re­search Acad­emy.

“In the past when we talked about fi­nan­cial mar­ket reform, we fo­cused on re­forms of bank­ing sys­tem and mar­ket pol­icy. We rarely talked about cur­rency pol­icy frame­work, but it has to be ad­dressed be­cause it is fun­da­men­tal to fi­nan­cial mar­ket reform,” said Zhu.

“Now, as the ren­minbi is in­cluded in the Spe­cial Draw­ing Rights bas­ket, the cur­rency pol­icy frame­work must be aligned with SDR re­quire­ments, such as en­abling ren­minbi to be hedged and traded. More global use of ren­minbi will push for­ward such re­forms,” said Zhu.

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