China's economy has taken off in the past 20 years after China's WTO accession, and financial opening has moved forward in depth
Twenty years ago, China knocked on the door of the World Trade Organization (WTO) and sounded the clarion call for my country to fully integrate into economic and financial globalization.
In the past 20 years, China has transformed from a follower at the beginning of its WTO entry to a leader in the world economy.
Over the past 20 years, China has fulfilled its initial commitments and steadily promoted the reform and opening up of the financial sector: China's large state-owned commercial banks have successively completed shareholding reforms and public listings; cancelled and relaxed the proportion of foreign shares held, and achieved "pre-entry national treatment" for foreign capital The reform of exchange rate marketization continues to accelerate, and the internationalization of the renminbi has also made positive progress.
Twenty years of practice has proved that open cooperation is the only way to achieve financial prosperity and development. Especially since the outbreak, despite such unstable domestic and foreign environments, the Chinese economy has still shown strong resilience, and the Chinese economy has grown against the trend.
In 2020, my country's gross domestic product (GDP) exceeded the 100 trillion yuan mark for the first time, an increase of 2.3% over the previous year.
Shareholding system reform has given the banking industry a "Nirvana Rebirth"
After joining WTO, bank reform became the starting point of financial reform.
China's banking industry has ushered in a major change in the development process-large state-owned banks have successively completed shareholding reforms and public listings, achieving a "nirvana rebirth."
Since then, China's banking industry has entered a new stage of development.
As a witness and witness to the reform of the joint-stock system of large state-owned banks, Jiang Jianqing, the former chairman of the Industrial and Commercial Bank of China, recalled recently that looking back 20 years ago, banks were the main channel of financing for the reform and development of the national economy. The indirect financial system provided a strong foundation for China’s economic development. Driving force.
However, due to the period of transition from a planned economy to a market economy, the problem of rising non-performing loan rates and declining asset quality caused serious problems in China's banking industry as "technically bankrupt" by the West.
When officially joining the WTO, the financial industry, as a protected industry, has a five-year transition period.
Meanwhile, all sectors of the market are generally concerned about the competitive prospects of Chinese banking institutions, and the problem of lagging banking system reform has aroused concern.
Since 2002, the four major banks of China Construction Industry and Agriculture Company began to reform the shareholding system, thus starting the modernization process of China's banking industry.
"In practice, several state-owned banks have chosen different share reform plans based on their implementation of policies, but they have basically reached the reform goal of creating a modern enterprise with clear property rights, clear rights and responsibilities, separation of government and enterprise, and scientific management." Zeng Gang, deputy director of the National Finance and Development Laboratory, told CBN that in this process, state-owned commercial banks have achieved a number of major reform steps, including organizational reforms, disposal of non-performing assets, and attracting foreign strategic investors, and gradually established them. With the establishment of the corporate governance structure and operation management system of modern commercial banks, the efficiency of resource allocation has been greatly improved, which has effectively supported the rapid economic development of China after my country’s accession to the WTO.
The reform of state-owned commercial banks has brought radical changes to the Chinese banking industry.
Comparing the four major banks of industry, agriculture, China, and China Construction with 13 important global banks in the United States, Europe, Japan and other countries or regions, it is found that the competitiveness of the four major banks has increased significantly in recent years, and the gap with the banks of developed countries is obvious. Zoom out.
One of the changes is reflected in the rapid growth of bank assets.
According to data from the my country Banking and Insurance Regulatory Commission, at the end of December 2003, the total assets of China’s banking institutions were 27.66 trillion yuan. By the end of October 2021, the overall scale of the banking industry had reached 332.97 trillion yuan, an increase of 12 times. A compound annual growth rate of about 15% has been maintained over time.
The data also shows that in 2003, the overall profit of the banking industry was 32.28 billion yuan, and in 2020 it increased to 2.26 trillion yuan; at the same time, the banking industry's owner's equity increased from 1.06 trillion yuan in 2003 to 22.63 trillion yuan.
In terms of provisions, at the end of 2002, China’s banking sector’s provision coverage ratio was 6.9%, with extremely low risk offset capability, but by the end of September 2021, this indicator was 196.99%, which was much higher than the international average and was at a historically high level. level.
In Zeng Gang's view, the development and changes of my country's banking industry before and after joining the WTO are mainly reflected in four aspects: first, rapid growth in scale; second, substantial increase in profitability; third, significant increase in risk resistance; fourth, continuous improvement in asset quality .
Zeng Gang emphasized that the huge changes in China's banking industry are rooted in both the internal industry and the macro environment.
From an internal point of view, the shareholding system reform and listing have optimized the bank's corporate governance, established a market-oriented operating mechanism, and comprehensively improved the bank's management capabilities and standards.
In terms of the macro environment, China's economic take-off triggered by WTO accession has led to huge investment and consumer demand, and has provided a huge market space for the expansion and efficiency improvement of the banking industry.
The trend of financial opening is rolling forward
Of course, China's accession to the WTO has brought more than just opportunities to China's banking industry, but also challenges.
With the continuous release of the signal of financial opening to the outside world, the trend of financial opening is rolling forward.
As one of the important areas of reform and opening up, the degree of openness of the banking industry has always attracted attention.
Earlier, the pace of my country's financial opening to the outside world has been very cautious.
However, with the changes in my country's financial development environment and the advancement of the internationalization of the renminbi, since 2018, the opening process of my country's banking industry has been further accelerated, and tremendous progress has been made in achieving "pre-access national treatment".
Cancelling and relaxing the proportion of foreign shares held and relaxing the business access conditions of foreign institutions. With the continuous release of the supporting implementation rules for financial opening, the market’s attitude towards opening has changed from the “wolf is here” to the current “mutual benefit, win-win and common development”. ".
In recent years, the number of foreign bancassurance institutions in China has grown steadily.
As of the first half of 2021, foreign banks have established 41 foreign corporate banks, 115 foreign bank branches and 139 representative offices in China, with a total of 930 business institutions and foreign banks’ total assets of 3.73 trillion yuan.
The continuous increase of investment by foreign bancassurance institutions also demonstrates their positive outlook and confidence in the Chinese market.
Since 2020, JP Morgan Chase, Barclays Bank of the United Kingdom, and Bank of New York Mellon have respectively increased capital of 1.5 billion yuan, 710 million yuan, and 600 million yuan to their institutions in China.
The entry of foreign banking institutions has further enriched my country's banking market structure.
Zeng Gang said that although the proportion of foreign-funded institutions is not high and there is no great competitive pressure on domestic banks, foreign-funded institutions have more mature business concepts, more prominent risk control capabilities, and market presence (such as retail banks, transaction banks, Wealth management, cross-border banking services, etc.) experience and capabilities have also played a positive role in promoting the development of the domestic banking industry.
In fact, at the same time that foreign banks entered, the internationalization process of my country's banking industry "going out" has also accelerated significantly.
Relevant data shows that as of now, about 22 Chinese banks have opened more than 1,000 branches in more than 60 countries and regions around the world.
Zeng Gang said that a higher level of financial openness will bring new development opportunities for China's banking industry.
In order to meet the needs of the globalization of financial asset allocation in the domestic resident sector and the needs of international investors for renminbi assets, my country has also recently launched a "cross-border "Li Caitong" further broadens the channels for two-way investment of bank wealth management customers.
All these will create a huge market space for the wealth management business of the banking industry.
In this regard, the Chinese banking industry should take the initiative to seize the opportunity of the global asset allocation needs of Chinese residents' wealth, and improve global asset allocation and management capabilities.
Positive progress in RMB internationalization
In the early stage of the "WTO", the market has many doubts about whether the RMB exchange rate will be fully market-oriented after the "WTO".
Over the past 20 years, my country's RMB exchange rate formation mechanism has undergone major changes, and the degree of marketization has increased significantly.
The time goes back to July 2005 when the People’s Bank of China initiated the RMB exchange rate reform and began to implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies for adjustment.
Since my country implemented the reform of the RMB exchange rate formation mechanism in July 2005, the central parity formation mechanism has been continuously improved.
Since then, after three consecutive adjustments in 2007, 2012, and 2014, the People's Bank of China has basically withdrawn from normalized intervention in the foreign exchange market, and the flexibility of the RMB exchange rate has increased significantly.
While the reform of exchange rate marketization continues to accelerate, the internationalization of the renminbi also continues to make positive progress.
At present, the renminbi has become the world's fifth largest reserve currency, fifth largest payment currency, and third largest trade financing currency.
During the period from 2009 to 2015, the internationalization of the renminbi accelerated significantly and successfully joined the SDR currency basket.
After the international financial crisis, the People’s Bank of China took advantage of the trend and gradually relaxed restrictions on the use of the renminbi in cross-border use, signed bilateral local currency swap agreements with 33 central banks or monetary authorities, and established renminbi clearing arrangements in 20 countries and regions. The first phase of the cross-border payment system (CIPS) was successfully launched.
In 2015, the renminbi successfully joined the SDR currency basket, marking the international community's recognition of the status of the renminbi as a reserve currency.
In recent years, the focus of RMB internationalization has shifted to the interconnection of the capital market, and the infrastructure for cross-border payments has been continuously improved.
On the basis of the launch of the "Shanghai-Hong Kong Stock Connect" in 2014, the "Shenzhen-Hong Kong Stock Connect" and "Bond Connect" were opened in 2016 and 2017 respectively.
Data shows that as of the third quarter of 2021, domestic RMB stocks and bonds held by foreign entities reached 36 trillion yuan and 3.9 trillion yuan, respectively.
At the same time, the CIPS system (Phase II) was launched in 2018, and the number of participants in the CIPS system reached 1,253 in November 2021.
When talking about the future outlook of RMB internationalization, Zhu Jun, Director of the International Department of the People's Bank of China, pointed out at the "Hong Kong International Financial Center Status and Prospects Seminar" on the 9th: First, the internationalization of RMB should continue to play the role of the offshore market. ; Second, the internationalization of the renminbi requires further opening of capital accounts; third, the internationalization of the renminbi requires us to do our homework and further improve the business environment.
Author: Du Chuan