China's Strategic Finance Drive: Considerations for Korea’s Next Steps

At the Central Financial Work Conference in 2023, China emphasized the importance of developing “Financial development with Chinese characteristics”for the nation's economic structural transition, and announced “building a financial powerhouse” as a key national strategic objective. The strategy, termed “Financial development with Chinese characteristics,” emphasizes strengthened Communist Party leadership over the financial industry, aiming to ensure stability, mitigate risks, and support high-quality economic growth. The Chinese government has undertaken significant institutional reforms around three main pillars: (1) building a comprehensive control framework to reinforce financial stability through enhanced Party supervision, (2) enhancing mechanisms to support the real economy by channeling financial resources into strategic industries such as technology, green finance, inclusive finance, pension finance, and digital finance, and (3) advancing market-oriented financial reforms, particularly interest rate liberalization, to improve capital allocation and address chronic credit constraints, especially for small and medium private enterprises. However, challenges persist, including excessive investment in real estate, local government debt, and underdeveloped capital markets. China is addressing these through supply-side reforms of capital markets, improved regulatory oversight, and efforts to foster world-class investment banks. For Korea, these developments imply both opportunities and risks. As China increases financial support for strategic industries and consolidates regulatory control, Korean companies and financial institutions must adapt their strategies to navigate evolving market entry barriers and geopolitical uncertainties. The report recommends that Korea formulate targeted economic cooperation strategies, closely monitor regulatory changes, assess financial risks, and strengthen bilateral policy coordination to ensure resilient and transparent business partnerships with China.