China News Service, Beijing, February 28th: How should China build a financial power?
Author Wang Xuekai, associate researcher at the School of Marxism, Party School of the Central Committee of the Communist Party of China (National School of Administration)
From last year’s Central Financial Work Conference to the recent opening ceremony of a special seminar on promoting high-quality financial development for leading cadres at the provincial and ministerial levels, General Secretary Xi Jinping has mentioned that we will unswervingly follow the path of financial development with Chinese characteristics and promote the development of finance in China. High-quality financial development talks about the task of building a financial power.
The development path of finance with Chinese characteristics not only follows the objective laws of modern financial development, but also has distinctive characteristics suitable for China's national conditions. It is essentially different from the Western financial model, which is specifically reflected in three aspects.
From the perspective of leadership, we must adhere to the centralized and unified leadership of the Central Committee of the Communist Party of China over financial work.
From the perspective of value orientation, we must adhere to the people-centered value orientation.
From the perspective of development ideas, we insist on taking financial services to the real economy as the fundamental purpose, insisting on risk prevention and control as the eternal theme of financial work, and insisting on coordinating financial openness and security.
So, how can China, which is taking the path of characteristic financial development, build a financial power?
Focus on key core financial factors
A financial power should be based on a strong economic foundation, have world-leading economic strength, technological strength and comprehensive national strength, as well as a series of key core financial elements.
One is a strong currency.
Of the 81 raw material price series released by the United Nations Conference on Trade and Development, only 5 are not priced in U.S. dollars. It can be said that the U.S. dollar, euro, Japanese yen, etc. occupy an absolutely dominant position in pricing, circulation and settlement, investment, financing, and reserves.
We should rely on the development trend of digital renminbi and use circulation and settlement as a breakthrough to steadily and steadily promote the internationalization of renminbi.
In April 2023, the 6th Digital China Construction Summit was held in Fuzhou. Guests visited the digital renminbi display and experience area of various pilot banking institutions set up by the forum.
Photo by Zhang Bin
The second is a strong central bank.
The central banks of financial powers have international influence to a large extent. For example, the monetary policy of the Federal Reserve can determine the direction of international capital flows and regulate the international macroeconomics. It should take the reform of global organizations such as the International Monetary Fund and the World Bank as an opportunity to continuously strengthen International voting rights and voice, and the establishment of a central bank with international influence.
The third is strong financial institutions.
The 2023 list of global systemically important banks released by the Financial Stability Board shows that Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China all belong to the second group and have not entered the third and fourth groups with higher importance. , and China's securities institutions, insurance institutions and other types of financial institutions are still not very competitive globally, and need to cultivate world-class financial institutions.
Fourth, it is a powerful international financial center.
Different domestic and foreign research institutions rank international financial center cities, and almost without exception New York and London are ranked in the top two. Singapore, Hong Kong, San Francisco, Los Angeles, etc. are also at the forefront. Shanghai and Beijing are also at the top of the list from time to time. However, compared with the top international financial center cities, there are still many gaps in financial services, internationalization, infrastructure, etc., and efforts should be made to make up for the shortcomings.
In 2010, "The Bund Financial Bull" appeared at the Bund Financial Plaza in Shanghai.
Photo by Sophie Pan
Fifth, strong financial supervision.
The financial supervision models of various countries are different. Russia, Singapore, etc. adopt the super central bank model, Japan, Germany, etc. adopt the comprehensive supervision model, the United Kingdom, Australia, etc. choose the bimodal model, China, France, etc. implement the central bank plus dual agency supervision model, and the United States as Financial powers have adopted a more powerful regulatory model, that is, giving greater power to the central bank, setting up numerous regulatory agencies, and forming a complex regulatory model with multiple, umbrella, branch, and cross-collaboration. China should continue to optimize the financial regulatory system and establish a strong financial regulation.
Sixth, a strong team of financial talents.
According to World Bank statistics, the number of people employed in the financial industry in the United States is 8.19 million, accounting for 3.79% of the working population. The number of employed people in China's financial industry is 7.396 million, accounting for only 0.76% of the working population. The number of financial talents in China is relatively small, and even more What is important is to cultivate a group of professional talents who have common knowledge of financial work and abide by the laws of the financial market.
The People's Bank of China in Beijing, taken in July 2023.
Photo by Jiang Qiming
Coordinate and balance risk prevention and opening up
We must focus on preventing and defusing financial risks, especially systemic risks.
China has not experienced a financial crisis in more than 40 years of reform and opening up, but there are still some risks.
In terms of government departments, the debt ratio of local governments in some provinces and cities will be relatively high in 2023, and some local governments have repeated hidden debts. A long-term mechanism should be established to prevent and resolve local debt risks, establish a government debt management mechanism that is compatible with high-quality development, and optimize Central and local government debt structure.
In terms of non-financial enterprises, the real estate market needs to promote a virtuous cycle between finance and real estate, improve the supervision system and capital supervision of real estate enterprises, and improve macro-prudential management of real estate finance.
In terms of the household sector, a survey by the People's Bank of China in 2020 showed that the household debt participation rate is high, and the total household debt per household is 512,000 yuan (RMB), mostly mortgage loans. The debts are concentrated among young and middle-aged and highly educated households, and families should be established. Departmental risk prevention and control mechanisms.
In September 2023, a real estate project was launched in Taiyuan, Shanxi, and sales staff recommended apartment types to customers.
Photo by Wei Liang
As for the financial institutions sector, all financial activities should be brought under supervision in accordance with the law, and institutional supervision, behavioral supervision, functional supervision, penetrating supervision, and continuous supervision should be comprehensively strengthened to eliminate regulatory gaps and blind spots.
It should also be recognized that the bottom line of financial security under open conditions must be maintained.
Financial openness is what a financial power should have. The distinctive feature of high-level financial openness is to move from an openness based on the flow of financial commodities and factors to an openness based on financial institutions. The essence is to move from "on-border" measures to "within-border" measures. measure.
To maintain the bottom line of financial security under opening conditions, three things must be done.
The first is to implement the pre-establishment national treatment plus negative list management system.
Pre-establishment national treatment is an important prerequisite for the financial opening of various countries, and the negative list management system is also an important way of financial opening in recent years. However, the negative list system of financial opening in developed countries is relatively vague, and they have greater power of self-interpretation and discretion. , China should pay attention to and study it to avoid falling into the trap of unequal financial opening.
In November 2023, Shanghai, the audience visited the China Pavilion at the Sixth China International Import Expo to view the achievements of the free trade pilot zone in the past ten years.
Photo by Tian Yuhao
The second is to benchmark the relevant rules in the financial field in international high-standard economic and trade agreements.
Different economic and trade agreements have different rules in the financial field. It is necessary to benchmark international high-standard rules, but not blindly follow international high-standard rules.
Taking new financial services as an example, both the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the United States-Mexico-Canada Agreement believe that other parties’ financial institutions should be given national treatment, and business applications from other parties’ financial institutions can only be rejected for prudential reasons. China's financial industry currently does not have sufficient capacity to withstand the impact of international financial institutions. In this regard, "efforts should be made to provide national treatment to other parties' financial institutions." This is also stipulated in the Regional Comprehensive Economic Partnership Agreement.
The third is to improve financial support for the joint construction of the “Belt and Road”.
The “One Belt, One Road” initiative is an important basis for China to promote high-level opening up, and is also an important “test field” for financial opening up. Financial institutional opening can be piloted under the “Belt and Road” initiative, and then promoted to a wider scope when it matures.
In December 2022, the “Belt and Road” Financial Summit Forum will be held in Hong Kong.
Photo by Chen Yongnuo
About the Author:
Wang Xuekai, PhD in management and postdoctoral in economics, is currently an associate researcher (associate professor) at the School of Marxism, Party School of the Central Committee of the Communist Party of China (National School of Administration). His main research directions are political economics and macroeconomics.
Hosted two youth projects of the National Social Science Fund and presided over two major special sub-projects of the National Social Science Fund.
He has published more than 30 academic articles in core journals and newspapers such as "Fiscal Research", won the 2021 "Deng Ziji Financial and Taxation Academic Paper Award", and participated in the compilation of many academic works.