An opinion piece published by the Chinese Communist Party’s bi-monthly journal of political theory flags further opening of the finance sector in future.
The piece entitled “Expansion of Financial Opening Highlights Confidence” (扩大金融开放凸显自信) published by Qiushi (求是) asserts that “shutting the door of finance…makes long-term development impossible.”
The publication of the opinion piece by Zhou Lin (周琳) was first featured in China Economic Net, and arrives just after Beijing announced that it would allow overseas banks to hold majority stakes in certain domestic financial institutions such as securities ventures and life-insurance companies.
According to the opinion piece further opening of China’s financial sector will expedite the reform process, as well as improve the ability of domestic players to compete on the international stage.
“As a competitive services industry the financial sector cannot walk the path of pre-emptive protection, and waiting to ‘grow up’ before opening up and competing internationally.
“The development experiences of the financial sectors of all countries clearly indicates that protectionism readily leads to problems such as laziness, soft fiscal constraints and power rent-seeking…lack of openness and competition often accommodates high leverage and non-performing loans, and the ‘greenhouse of protectionism’ often weakens financial competitiveness and damages healthy development.
“Our country’s practices also prove that the rapid development of a modern financial services sector derives benefit from openness, and [we] should expand financial sector openness with greater confidence.”
Zhou Lin points to the expediting of reform and improvements to the efficiency of domestic firms as the two key areas where opening of the financial sector will bring benefits.
“On the one hand, [we] need to use opening to expedite financial reform…financial opening itself is a key component of financial reform.
“For example, the One Belt One Road initiative will bring a large volume of new opportunities for financial cooperation, develop overseas conditions for the development of domestic financial institutions, and provide the financial services sector room for development when it comes to trade, investment and capital operations.
“This form of overseas opening of the domestic financial services sector will bring reform pressure and growth impetus via competition mechanisms, and in fact greatly spur our own development and strengthening.”
Zhou also highlights the the improvements to China’s financial sector that access to overseas knowledge, experience and business can bring.
“During opening, [we] need to raise financial efficiency, study advanced experiences and optimise resource allocation.
“Opening is in fact the process of introducing foreign-invested financial institutions, overseas customers and overseas enterprises, and is also the process of domestic financial institutions and enterprises going abroad.
“During the process of establishing an opening regulatory system, the financial sector must raise its modern financial sector efficiency and market resource allocation efficiency…making full use of both domestic and overseas financial markets and financial resources with greater confidence.”