First of
all, all of the panelists insist that reform is the key to solving the existing
problems in China's financial sector. They seem to agree that further reforms
in the financial sector, such as marketization of the interest rate, relaxation
of capital flows under the capital account and financing of small and
medium-sized companies are critical to the shift of the Chinese economic growth
model in the future. Several panelists suggested that further reform of the
financial sector will lead to better differentiation of financial sub-sectors
(banking, brokerage and insurance), competitors (i.e. different types of banks)
within each sub-sector, and products and clientele. Such differentiation will
help further the growth of the Chinese sector.
Second,
the panelists all spoke of financial innovations and their importance to the
reform of the financial sector. A few areas worthy of particular attention
include the development of the bond market, reform of the A-share market and
development of a deposit insurance mechanism and asset-backed securities. Some
panelists emphasized that the reform of the financial sector rests in the hands
not only of the market participants, but also of the regulatory bodies, which
themselves require further reform.
In
addition, almost all panelists talked about the importance of globalization to
the reform of the Chinese financial sector. As China becomes an increasingly
important part of the global economy and more and more Chinese companies
conduct business overseas, the Chinese financial sector is required to go
global at the same time. The increasing use of RMB in the global trade and
financial system and the gradual relaxation in the pricing mechanism of the RMB
yuan and flow under the capital flow will not only help Chinese financial
institutions become more globally oriented, but also help the Chinese economy
to become more open.
The
reform of the financial sector in China heavily depends on reform in other
areas of China, most notably in the economic growth model and political and
legal systems. In return, reform in the financial sector may also provide a
catalyst for further reforms in the above-mentioned areas.
Finally,
the panelists answered two questions: what are the biggest risks that you see
facing the Chinese financial sector, and what are the most important areas of
the financial sector in which you wish to see the greatest reform? The consensus
is that the lack of further reform is probably the biggest risk facing the
Chinese financial sector; and the development of the bond market and reform of
the Chinese A-share stock market are the most important areas for future
reform.