Wei Benhua: The Dividend of Financial Reform and Opening up Will Boost China's Economic Development

2015-05-09 IMI

Wei Benhua: Former Deputy Administrator, the State Administration of Foreign Exchange of China, former IMF Executive Director for China The 18th Party Congress Report clearly pointed out that reform and opening up is the only way to uphold and develop socialism with Chinese characteristics. Since reform and opening up, our country has made great progress and achievements in various fields such as economy, politics and social development, which received high praise and evaluation from the international community. But still we should be soberly aware that China's economy is now under an important phase of transition of transforming the economic growth pattern, faced with various challenges, including the sustainability of energy and resources that are needed by the economic development, the protection and improvement of environment, the challenges in the process of urbanization, the disappearance of demographic dividend and the coming of aging society, etc. Facing the challenges mentioned above, we have no other choice and way out, and what we can only do is to continue to adhere to the policy of reform and opening up. As the 18th Party's Congress pointed out, in the consistent exploration for more than 30 years since reform and opening-up, we firmly held the great banner of socialism with Chinese characteristics, neither following closed and rigid path, nor going astray and changing our banner. The brilliant achievements made in our financial sector since reform and opening up have been acknowledged by the world, and don't need further explanation. It is an undoubted fact that our financial development strongly supported and promoted the development of China's economy. But we should also be aware of the fact that there is still large gap among the competitiveness of China's financial institutions (particularly international competitiveness), the degree of financial market matureness, the diversity and richness of financial products and the level of financial supervision, etc., compared those with the developed countries. Taking China's foreign exchange market as an example, in 2012, accumulative total turnover of the foreign exchange market of RMB was $9.18 trillion, which was roughly equivalent to the global foreign exchange market transactions of two days. Another example is that there are many restrictions in the capital account management, which causes banks and companies feel very confined when they expand their businesses, especially international business. Therefore, we must continue to vigorously promote the reforms of financial sector. Financial sector reform and the overall design should follow the principles set up in the "Financial Industry Development and Reform for the 12th Five-Year Plan", and emphasize on that financial sector reform and opening up policy aims to serve the real economy. At present, in the foreign exchange area about the reform and opening up, the most frequently discussed issue is liberalization of capital account, that is to realized the conversion of RMB under capital account. In 1996, RMB had already convertible under current account, and from then on began a progress of RMB convertible under the capital account. In the development of over past ten years, our country went with the trend, launched a series of policies and measures and made considerable achievements in liberalizing the capital account. According to IMF that the capital account could be divided into 7 categories with 40 items, the number of items realized about basic convertibility and partially convertible is 30, 75% of the total number. Of course, the remaining items are most difficult to realize. Currently, views about promoting capital account convertibility can be roughly divided into two groups. Some believe that our country should promote the reform of interest rate, exchange rate and the related reforms in other fields, in order to realize the RMB fully convertible under the capital account as early as possible. Others hold the view that the risk is too big if we fully open the capital account, therefore we should be careful and cautious, and don't set a timetable for that. Actually, the two points of view are all make sense, but here we don't do more analysis and argument. There was once a similar debate when China was preparing itself to join the WTO. However, history has proved that it is from the day when China became a member of WTO that our country's economy and trade has made enormous profits and will continue to benefit from that. I believe that every new reform and opening up in financial and foreign exchange field will add new vitality to boost the economic development of our country. Although intangible, the dividends brought by financial reform and opening up are tremendous. History will witness this again.

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Wei Benhua: The Dividend of Financial Reform and Opening up Will Boost China's Economic Development

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