China’s official press agency has published an editorial calling for the country’s financial sector to channel more funds to the real economy.
The latest editorial piece published by the Xinhua News Agency notes that the “creation of an excellent finance environment for the development of the real economy and the opening of channels for the entry of finance into the real economy” is one of six objectives recently mooted by President Xi Jinping for maintaining financial security at a recent meeting of the Chinese politburo.
The piece entitled “Guiding the Waters of Finance to Better Irrigate the Real Economy” (引导金融活水更好地浇灌实体经济) by Tan Moxiao notes that “finance is the core of a modern economy, and is an important tool for the resource allocation and macro adjustments, as well as a major force for driving economic and societal development.
“We must fully recognise the key position and role of finance in the development of economic and social life.”
While the editorial lauds the ongoing reform process in “expanding the support that finance provides to the real economy,” it is also critical of a trend within the sector to “withdraw from the real the turn towards the empty,” and the need for further improvements to its effectiveness in serving the real economy.
“The mission of finance is to properly serve the real economy,” writes Tan. “China is currently in a key period of shifting and upgrading its economic model, and switching from old to new drivers of growth. The development of the real economy urgently needs an excellent financial environment.
“When finance puts money at the ‘knife’s edge’….the real economy can obtaining even more sources of sustenance. This requires the clearing of channels for finance to enter the real economy, by strengthening lending policy guidance, encouraging financial institutions to expand their financial support of advanced manufacturing sectors, micro-enterprises and other key sectors and linkages; raise the availability of funds and reduce financing costs.”
In order to better service the real economy, the Xinhua editorial calls for further reforms of the capital market and the expansion of direct financing.
It points in particular to the incomplete nature of capital markets, noting that that is remains dominated by interbank lending, with direct financing comprising only a smaller share.
In order to improve capital markets, Tan points to the need to improve the securities trading market, actively develop ancillary boards on bourses, pursue the standardised development of regional equities markets, and develop bond markets populated by qualified institutional investors and over-the-counter markets.
