US Dominance of Global Finance System Challenged by China: Hank Paulson

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Former US Treasury Secretary Hank Paulson says that China poses a major challenge to the long-standing dominance of the global financial system by the US.

In an op ed published by the Wall Street Journal, Paulson writes that China has ambitions to become the “world’s banker,” and will be an “increasingly formidable challenger in financial services” within the near future.

Paulson highlighted efforts by Beijing to open up and enhance China’s financial sector, which have helped to drive Shanghai to pole position amongst global bourses in terms of the number of IPO’s and capital raised during the period from January to September of 2020.

“China lags behind the advanced financial centers, but it has belatedly begun to open up and attract best-in-class foreign financial institutions,” wrote Paulson.

“Its markets have governance and accounting issues to overcome, but Beijing is working to enhance its regulatory structure to meet global standards and provide greater transparency and better enforcement.”

While China hopes to enhance its lustre in the eyes of international capital, Paulson points out that in stark contrast the US has “undermined…trust through shortsighted actions and long-term fiscal negligence.”

Paulson pointed the finger of recrimination at measures by the Trump administration to target China specifically, such as the delisting of Chinese companies from US exchanges, in a move that could “bring serious and under appreciated risks.”

“While investors from around the world are benefiting from investing in equity securities from China, Washington is making it more difficult for U.S. investors to do so,” writes Paulson.

“America’s leadership in financial services is a core strength of the U.S. economy. But this mantle of leadership isn’t preordained. If it is to endure, America needs to play to the strengths that have made its capital markets the envy of the world.”

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