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The Oxford Companion to the Economics of China$
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Shenggen Fan, Ravi Kanbur, Shang-Jin Wei, and Xiaobo Zhang

Print publication date: 2014

Print ISBN-13: 9780199678204

Published to Oxford Scholarship Online: December 2014

DOI: 10.1093/acprof:oso/9780199678204.001.0001

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How can China’s financial system help to transform its economy?

How can China’s financial system help to transform its economy?

(p.217) 33 How can China’s financial system help to transform its economy?
The Oxford Companion to the Economics of China

Franklin Allen

Jun ‘QJ’ Qian

Oxford University Press

This chapter discusses how the financial system can help transform the Chinese economy from a state-led, investment intensive, export-oriented economy into one that relies more on domestic consumption and private sector production. There are five main goals for the next decade: First, more funding is required to support the growth of hybrid sector firms. Second, more financial products and markets are needed to provide a diversified basket of investment products for households and firms. Third, private equity (PE) and venture capital (VC) sectors should be developed to fund innovation and new industries. Fourth, non-bank financial institutions must grow to fund social safety net programmes, and local governments should be able to raise funds through bond markets. Finally, China should try to prevent severe financial crises such as a banking sector and/or market crash and also expand the Renminbi (RMB) as a major international reserve currency so as to balance global capital flows.

Keywords:   Chinese economy, domestic consumption, economic reform, economic policies, financial policies

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