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Chinese policymakers are attaching greater importance to broadening
all-around financial opening-up as a key driving force of China's new
growth paradigm, while stressing continued financial stability amid
global economic uncertainties caused by the COVID-19 pandemic. Economic and financial policies should remain supportive to sustain
the recovery and growth of the world's second-largest economy, through
leveraging outbound capital resources and expanding market access.
Meanwhile, tight financial regulations should help counter the risks of
excessive speculation, financial bubbles and fraudulent investment,
officials and experts said at a summit over the weekend. Further opening-up of the financial sector is necessary for building a
"new development paradigm", which will attract more foreign
institutions, increase business opportunities and enrich financial
products. It will also promote the domestic financial system and
strengthen financial services in supporting the real economy, Yi Gang,
governor of the People's Bank of China, the pral bank, said in a
video address at the opening ceremony of the 2020 Bund Summit in
Shanghai on Saturday. The country will treat foreign financial institutions and domestic
companies equally in business license issuance, and use a negative list
to manage investors, which is called the "pre-establishment national
treatment and negative list" management system, Yi said. The pral bank governor pledged to push forward financial
opening-up along with reform of the renminbi exchange rate regime, and
promote market-oriented internationalization of the currency. The reform will enhance flexibility of the renminbi exchange rate,
and the rate should play a role as an "automatic stabilizer" of economic
growth and the balance of international payments. Regulators should
ease controls on cross-border usage of the renminbi, following market
rules, and renminbi internationalization should be a "natural tendency",
he said. China's leadership has explained the "new development paradigm "as a
model that shifts economic growth drivers from factors of production to
innovation, and from investment alone to both consumption and
investment. Given the ongoing drastic changes in the global financial and
economic environment, China needs to take more flexible measures to
tackle risks and challenges in developing the domestic financial market,
and to seek innovation at the same time, Vice-President Wang Qishan
said in a video speech at the summit. Wang called for preventing and defusing financial risks related to
speculative activities, financial bubbles and Ponzi schemes, and
strengthening financial regulations during the process as China
accelerates the establishment of the new development paradigm. Ray Dalio, founder, co-chief investment officer and co-chairman of
Bridgewater Associates, said, "As China opens its capital markets, it
will find favorable capital flows because the fundamentals of investing
in China are strong." He said it is now the right time for China to internationalize the RMB and develop financial pers. Structural reforms and deepened opening-up will rebalance and
facilitate China's economy in the post-COVID period, which will also
fuel the global economic recovery, according to experts. International Monetary Fund Deputy Managing Director Zhang Tao said
at the Bund Summit that countries in the Asia-Pacific region should
implement supportive monetary and financial policies, while reducing
vulnerability in the corporate and financial sectors, as they tackle the
challenges brought by the COVID-19 pandemic. More fiscal support The government should provide more targeted fiscal support to the
most vulnerable in society, by taking measures such as strengthening the
healthcare and social security systems, and curbing the intensification
of income inequality, according to Zhang. The IMF has revised up China's GDP growth projection for 2020 from 1
perp to 1.9 perp. China's economic recovery will provide strong
driving forces for growth in the Asia-Pacific region and make a great
contribution to economic recovery in other regions, he added. Rapid economic recovery in the first three quarters in China has
strengthened foreign investors' confidence in the nation's economic
fundamentals. From January to September, foreign investors have
increased their holdings of interbank-market bonds by 719.1 billion yuan
($107.57 billion), according to data from the PBOC. FTSE Russell, a global multi-asset index provider, announced that it
will consider adding Chinese government bonds to its flagship World
Government Bond Index from October 2021. Since 2018, eight foreign securities companies, two foreign fund
management companies, and 20 private securities investment fund managers
have entered China's market, the pral bank said.
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