Financial Reform in Australia and China

This paper describes the Australian experience of domestic financial deregulation, capital account liberalisation and the float of the exchange rate, and provides a comparison to China's current efforts to reform its own financial system. In doing so, it considers similarities and differences in the circumstances facing the two economies. Australia's financial reforms were essential, in the longer term, for building a stronger economy and more robust financial system, but the paper does not interpret the Australian experience as a prescription for financial reform in China. Indeed, the specific sequencing of deregulation that occurred in Australia might not be optimal in a Chinese context, although it is likely that the reforms themselves, pursued with appropriate caution, would have long-run benefits for the Chinese economy.