ReadersexperienceaudiopublicationscreatedbyHimalayaFM.ShanghaiPudongSoftwareParkIncubatorhasincubatedseveralenterpriseswithanestimatedmarketvalueofhundredsofmillionsofU.S.dollarsincludingthisaudiopublicationprovider.ICChina’seconomyistransformingfromhigh-speedgrowthtohigh-qualitydevelopment.Thefinancialsectorneedscorrespondingadjustment.Tobuildamoderneconomy,synergeticdevelopmentoftherealeconomy,scientificandtechnologicalinnovation,modernfinanceandhumanresourcesarerequired.Modernfinancialsystemsareanecessaryfacetofanymoderneconomy.Today,Chinaisreformingitsfinancialsectorforbetterdevelopmentoftherealeconomyandtightercontroloffinancialrisks.
ServingtheRealEconomy
Financeisalifelinefortherealeconomy,andthetwoaretightlyintermingled.Pastexperienceshowsthatifdevelopmentofthefinancialindustrydivergesfromthatoftherealeconomyinthelongtermandtoagreatextent,developmentwon’tbesustainable,andtheresultwillalwaysbelargeaccumulationsofrisksthatultimatelyexplodeintoacrisis.Overthelasttwoyears,financialproblemsof“distractionfromtherealeconomy,”“idlefunds”and“internalcirculation”haveemergedinChina’seconomy.Themostoutstandingproblemisastartlingcontrastbetweenthehigh-speedgrowthinthefinancialsectorandthecontractioninmanufacturing.Alargevolumeoffundscirculatingwithinthefinancialsystemremainreluctanttogetintotherealeconomy,whichstretchesthecreditchainoffinancetoservetherealeconomy,raisesthefinancingcostofmanufacturingenterprisesandmakesfinancialserviceslessavailable.
Tomakefinancebetterservetherealeconomy,improvementsshouldbemadeinmethodsofmacrocontrol,patternsoffinancialservices,andstrategiesforfinancetobetterfulfilitsfunction.Onemajortaskishandlingtherelationshipbetweendirectfinancingandindirectfinancing.Directfinancingshouldbegivengreaterpriority.Acoupleofyearsago,theproportionofdirectfinancingbynon-financialenterprisesincreasedconsiderably.Directfinancinginaggregatefinancingtotherealeconomyaccountedfor24percentin2015and23.82percentin2016.Influencedbychangesinthefinancialmarket,however,theproportionofdirectfinancingplummetedin2017.Bondfinancingandnon-financialcorporations’domesticequityfinancingaccountedforonly2.3percentand4.5percent,respectively.Promotingdirectfinancingaimsnotonlytode-leverageandlowercorporatecosts,butalsotopromoteinnovation-drivendevelopment.Regulatoryauthoritieshaveimplementednewmeasuressuchasreleasinginnovationbondsandgreenbonds,urgingNationalEquitiesExchangeandQuotations(NEEQ)andChiNexttooffermoreservicesforemergingindustriesandbusinesses,andenactingregulationsencouragingequityincentive.
PromotingFinancialRegulation
Inrecentyears,considerablefinancialinnovationssuchasinternetfinancehavesweptacrossChina.Duetopastrestrictionsonregulation,issuessuchasloopholes,conflictsofinterestandarbitragehavebeenchronicandpersistent.Financialrisksinsmallscalehaverepeatedlybrokenout.Inresponse,theFinancialStabilityandDevelopmentCommitteeundertheStateCouncilofChinawasorganizedinJuly2017tostrengthenplanningandcoordinationofregulationandprovideinstitutionalguaranteeforpreventingsystemicfinancialrisks.InApril2018,theChinaBankingandInsuranceRegulatoryCommissionwasfounded,endingtheoldregulatorysystemcomprisedofthePeople’sBankofChinaandthreeregulatorycommissionsrespectivelyforbanking,insuranceandsecurities.Thismeasurehaseliminatedconsiderableconflictsofinterestinregulation.Itisconducivetobetterpreventingandeliminatingfinancialrisks,protectingthelegitimaterightsoffinancialcustomersandsafeguardingthestabilityofthefinancialsector.
Inthefuture,regulationonfinancialfunctionandconductwillbehighlighted.Regulationonfunctionfocusesontheactivitiesoffinanceinsteadofonfinancialinstitutions,whichmeansthatfinancialservices,regardlessoftheformorinstitutionprovidingthem,solongastheyhavethesamefunction,willfollowthesamerules.Althoughnamesoffinancialinstitutionsvary,functionsofthoseorganizationsarerelativelystableandmainlyconsistofpaymentandsettlement,collectingmoney,allocatingresourcesacrosstime,spaceandindustries,riskmanagement,pricediscoveryandreducinginformationasymmetry.Conductregulationissupplementaryfinancialregulationfromanotherperspective.Itfocusesonwhetheraspecificconductofanorganizationorindividualinvolvedinfinancialactivitiescomplieswiththerules.Inpractice,factorssuchasfraud,exorbitantinterestrates,highlycomplexfinancialderivatives,ignorantandfearlesscustomersandlackofeffectiveregulationallcontributetofasteraccumulationofrisks.Implementationofconductregulationcangreatlyeasethesituation.
VisitorsinanexhibitionhallofAntFinancialinHangzhouinsoutheasternChina.OnJune8,2018,AntFinancialannouncedanotherroundoffinancingofUS$14billion,whichwillmainlybeusedtoimproveAlipayanditspartners’abilitytoprovideinclusivefinancialservicesforglobalcustomersandsmallandmicrobusinesses.VCGDeepeningFinancialReform
Presently,China’sfinancialreformonthemacrolevelfocusesonfinancialorganizations,andthegoalistoimprovethestructureofmodernfinancialenterprisesandcorporategovernancestructure.Modernenterprisestructurefeaturestransparentownerships,clearrightsandresponsibilities,separationofgovernmentfunctionsfromenterprisemanagementandscientificmanagement,amongwhichtheprincipleoftransparentownershipsiscore.Consequently,optimizingshareholderstructureinfinancialinstitutionshasbecomeafundamentaltaskoffinancialreform.Typicalcorporategovernancestructuredemandsasoundrelationshipbetweenshareholders,boardofdirectors,managersandotherstakeholders.Italsorequireseffectiveincentiveandrestraintmechanisms,internalcontrolmechanisms,riskmanagementmechanismsandexternalsupervisionmechanisms.
Atthemacrolevel,thecoreoffinancialreformisstreamlininginstitutionsandsystemsincludingtheinterestrateliberalizationmechanism,theRMBexchangerateformationmechanismandthegoalandsequenceofopeningupofthefinancialsector.TheremovalofrestrictionsonRMBdepositratessymbolizedthatinterestratemarketizationhascompletednominally.Butfullinterestrateliberalizationneedstobebuiltonabenchmarkinterestratemechanismandaninterestratetransmissionandregulationmechanism,throughwhichthepriceoffundscanbedeterminedbythemarket,ensuringthemarketplaysthedecisiveroleinallocationofresources.Momentumforreformisalwayscreatedthroughopeningup,whichisacoreexperienceofChina’sdevelopment.TheRMBexchangerateformationmechanism,capitalaccountconvertibilityandRMBinternationalizationarethreemajortargetsforChina’sfinancialopeningup.Whataretherelationsbetweenthem?ThereisnoestablishedprecedentforabigdevelopingnationlikeChina.So,Chinaneedstocontinueitscarefulexplorationandmoveforwardsteadily.
OnApril8,2018,theChinaBankingandInsuranceRegulatoryCommissionwasfoundedinBeijing,endingtheoldregulatorysystemcomprisedofthePeople’sBankofChinaandthreeregulatorycommissionsrespectivelyforbanking,insuranceandsecurities.VCGOnJuly12,2017,HunanGOKEMicro-electronicsJointStockCo.,Ltd.wentpublicatChiNextofShenzhenStockExchange.Itwasthe2,000thcompanytobelistedontheShenzhenStockExchange.VCGTheauthorisanassociateresearchfellowwiththeNationalAcademyofEconomicStrategyundertheChineseAcademyofSocialSciences.