Building an Efficient Financial System in China: A Need for Stronger Market Discipline. (July 2017)

• Record Type: Journal Article
• Authors: Huang, Yiping; Wang, Xu
• Is Part Of: Asian economic policy review. Volume 12:Number 2(2017)
• Page Start: 188
• Page End: 205
• Publication Date: 2017-07
• Subjects: China -- digital finance -- dual‐track strategy -- financial reform -- financial repression; G20 -- G38 -- P34; Finance -- Asia -- Periodicals; Asia -- Economic conditions -- Periodicals; Asia -- Economic policy -- Periodicals; 330.95
• DOI: 10.1111/aepr.12173
• Languages: English
• ISSNs: 1832-8105

Abstract

Abstract : China has built a very comprehensive financial system, but has not let the market mechanism work freely. This unique pattern, rooted in China's dual‐track reform strategy between state and non‐state sectors, did not prevent a strong economic performance in the past, but is now a main cause of economic inefficiency and financial risks. The rapid development of digital finance is a back‐door way of financial liberalization, responding to both old repressive policies and new technologies. To accomplish the mission of building an efficient financial system, the government needs to take at least three further steps in financial reform: creating a level‐playing field; freeing up the market mechanism; and improving regulation. The key test lies in the effective enforcement of market discipline for corporate and financial institutions.