China's financial reform exercises global influence

Updated: 2014-03-11 15:33


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BEIJING - Financial reform, financial risks management and further opening up of the market have been put in the spotlight of China's ongoing "two sessions," and these hot topics are also attracting much attention overseas.

China's financial reforms will be able to create a financial market that could rival the US and European markets, but how will global investors think of it? What does the rise of the Chinese market mean to foreign investment bank analysts?

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Xinhua correspondents have interviewed economists and company senior executives to hear what they have to say about China's financial reform.

Dialogue 1

Xinhua: Financial reform is a heated topic being discussed during China's ongoing "two sessions." Over the past year, China has adopted a series of financial reform measures, including establishing the Shanghai Free Trade Area and accelerating the internationalization of renminbi. What are your thoughts on China's financial reform and its global effect?

Gu Qingyang, Associate Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore, said China's financial reform affects the world primarily in two aspects: one is real economy, the other financial market.

"The success of the reform will contribute to healthy development of Chinese real economy, and in turn lead and drive regional and global economy," he said.

"Meanwhile, reform directly touches upon global finance sector, which will bring new development opportunities to offshore financial institutions," he added.

Dialogue 2

Xinhua: China's financial reform is being pushed forward, and financial risks also need to be closely observed. How do you evaluate the financial risks China faces amid the volatility of the emerging market?

Haibin Zhu, J.P. Morgan Chief China Economist, said China maintained a good performance in the latest round of volatility of the emerging market.

"China has three advantages in preventing and controlling financial crisis: first, debt levels are kept relatively low; second, high savings ratio facilitates growth of domestic investment; third, with China's huge foreign exchange reserves, People's Bank of China has strong capacity in averting liquidity risks," Zhu said.

He noted the Chinese financial market also faces certain risks. For instance, debt or leverage ratios witness a significant rise, and part of credit in the "shadow banking" sector flows to local governments, property developers and industries with excess capacity.

Also, financially insufficient local governments are exposed to default risks, he told Xinhua.

Jayanta Datta, CEO and research analyst at Independent Insights Group based in New York, said China has non-performing loans risk, real estate risk and asset price risk.

"Each country has its separate risks, and different countries have different policies," he said. "In general, the Chinese government is taking a number of steps to address those issues and reduce those risks."

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