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China’s Financial System: Past Reforms, Future Ambitions and Current State

In: Currency Cooperation in East Asia

Author

Listed:
  • Patrick Hess

    (European Central Bank)

Abstract

Commensurate with its economic strength, China aims for a financial sector and currency of global importance. To assess the likelihood of this ambition in the light of the not fully convertible renminbi and sheltered financial system, this essay reviews past reform efforts and the current state of the Chinese form of capitalism. It finds that after a decade of bold financial reforms under Jiang Zemin and Zhu Rongji, the momentum began to wane from 2005 onwards. The new leadership under Xi Jinping and Li Keqiang needs to complete important reforms before China’s financial sector and currency can rise to international standards and importance. The new leaders seem to be aware of the historic nature of this task and are willing to close the gaps. In particular this includes introducing market pricing of capital and risk, increasing the breadth, deepness and liquidity of financial markets and improving the institutional framework for financial stability. If successful, these reforms are likely to sustain economic growth in the long term, boost currency cooperation in East Asia and speed up the emergence of a regional RMB bloc.

Suggested Citation

  • Patrick Hess, 2014. "China’s Financial System: Past Reforms, Future Ambitions and Current State," Financial and Monetary Policy Studies, in: Frank Rövekamp & Hanns Günther Hilpert (ed.), Currency Cooperation in East Asia, edition 127, pages 21-41, Springer.
    • Handle: RePEc:spr:fimchp:978-3-319-03062-3_2
    DOI: 10.1007/978-3-319-03062-3_2
    as

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