Faced with these problems and challenges, China will push to construct a modern financial system and improve the efficiency of financial service to the real economy during the 13th Five-Year Plan period. Besides comprehensively deepening financial reform and perfecting the financial system, China should also focus on perfecting the sci-tech financial system, develop a green financial system and promote an inclusive financial strategy. The finance industry should emphasize the thought about actively “capitalizing” technological achievement and adapt to the development based on “mass innovation and entrepreneurship”. It is urgent now to establish a modern financial system that is different from the traditional one and is more open to economic update and industrial autonomous innovation. By means of government fiscal investment, corporate R&D, industrial investment, venture capital, bank credit investment, capital market financing, science funding and so forth, China should make a strategic investment in this type of financial system that can provide a full range of financial support to update its economy.

Meanwhile, China takes “two-way financial openness” as an important strategic task during the 13th Five-Year Plan period. This is the only way to construct a more open economic system and transform China from a financial giant to a financial power. In the next five years, both the international and domestic financial environments will become more complicated, and China will still face the challenges like low-efficiency financial asset allocation and the serious imbalance arising from the international division and distribution of benefits between the global financial centers and the global manufacturing centers.

In the full global market competition, the technological advancement and the human capital formed by the input of capital and labor elements will continuously increase the marginal income, promoting sustainable long-term growth of the open economy. To this end, the finance industry should play a role in optimizing resource allocation to improve the operating efficiency of the financial system. Therefore, China must carry out the development strategy of financial opening-up and financial internationalization in a cautious, orderly and gradual way. China must promote the cross-border flow and the market allocation of the financial or capital factor, eradicate institutional barriers to financial development and make substantive breakthroughs in major fields and key elements, speeding up the financial transformation of market allocation.

In 2014, China became a net capital exporter with the direct investment in foreign countries at $116 billion in 2014 compared with $69 billion in 2010. Especially with the implementation of major strategies like “One Belt One Road” and international cooperation on production capacity, overseas direct investment by private investors will continue to outgrow foreign direct investment in the future. It thus decides that in macro economy, China must actively adjust the structure of reserve-asset allocation. As it grasps the opportunities of “One Belt One Road” and “Go Global” strategies, China should construct an efficiently operating system that covers the global investment transactions, payment and settlements and to construct a credit-rating system and financial security safeguarding system in order to comprehensively improve China’s financial competitiveness.

Zhang Monan is a researcher at the China Center for International Economic Exchanges.

This post was first published at Chinausfocus.com. To see the original version please visit: http://www.chinausfocus.com/finance-economy/what-kind-of-modern-and-open-financial-system-does-china-need/

Go to Forum >>0 Comment(s)