Overhaul the Financial System

Feb 27-2019   

What’s urgently needed now is not pumping up the liquidity, but de-blocking the conduit between monetary policies and the financing needs of micro-firms, argues NSD Prof. Huang Yiping. In his paper for the latest issue of China Finance magazine, Prof. Huang says that despite some positive results from the structural measures undertaken by the Central Bank since the fourth quarter of 2018, financial reforms - including transformation of monetary policy framework - should be pushed forward to meet the financing needs at micro-level. China’s financial system has been perennially biased against private firms, and all the more so of late, largely because the financial system has not moved forward in tandem with the transition of the economy. He believes that in the short term, decision making of monetary policy will lean towards stabilizing the macro-economy; while in the mid-term, it shall facilitate the transformation of monetary policy framework, including renouncing interference in rate-setting for deposits and loans and allowing financial institutions to make market-based risk pricing. With regard to policy goals, GDP growth will cede ground to inflation rate and unemployment rate, he says.