Finance needs open environment

Bad performance won’t be tolerated: PBC governor

China should further open the financial services industry and embrace outside competition to bolster the sector, People’s Bank of China ( PBC) Governor Zhou Xiaochuan said Tuesday.

“To prevent financial risks, we must first guarantee the health of financial institutions. Unfavorable metrics such as high leverage, low capital and bad loans should not be tolerated,” Zhou said in the keynote speech of the two- day Lujiazui Forum held in Shanghai, according to the website of the PBC, China’s central bank.

Such problems usually reflect a lack of opening- up and competition, Zhou said.

“There is much room for the Chinese financial sector to open up but it should be done in an orderly manner,” Qiao Baoyun, an economist at the Central University of Finance and Economics, told the Global Times on Tuesday.

“Looking back at the period since we brought in foreign banks [ after the start of the reform and opening- up policy], domestic banks have learned a lot thanks to the outside competition,” Zhou noted.

“For instance, our financial products, market structure, business mode and management have all improved. In the meantime, the entry of the foreign banks has also brought some pressure on China’s reform in terms of accounting standards, governance standards and other issues,” according to Zhou.

“From the experience of many countries and regions, including our own, protection will lead to laziness and weakness ... protectionism will lead to weak competitiveness and hurt the industry’s development, as well as resulting in unhealthy and unstable markets and institutions,” he said.

“As a financial market participant, we need to be aware of the importance of enhancing our competitiveness when the market becomes more open, as more foreign financial institutions are entering China while ours are going out,” Qiao said.

Many Chinese financial institutions have gone global and managed to fit in with international competitors. In particular, there have been some essential changes in risk management, pricing and prevention of money laundering, Zhou noted.

“The construction of the ‘ Belt and Road’ initiative provides a new opportunity for Chinese financial institutions to explore overseas markets, making for better services for trade, investment and capital operation,” he said.

Chinese financial market regulators should consider equally opening the door to private financial operators in China, Tian Yun, director of the research center at the China Society of Macroeconomics, told the Global Times Tuesday.