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Huang Yiping: How to Enhance China's International Financial Influence

Oct 15-2024   



At the end of October 2023, the Central Financial Work Conference (CFWC) proposed for the first time to "accelerate the construction of a financial powerhouse", which should have three main characteristics: high efficiency, soundness and international influence. The Central Financial Work Conference laid out the direction of enhancing the international influence of the financial sector, namely to promote systemic openness, emphasise economic and financial security, and attract foreign financial institutions and long-term capital to China. Enhancing China's international financial influence can be based on the following three aspects:

First, connecting with international financial markets. At present, China's international financial influence faces constraints. On the one hand, China's financial development path has Chinese characteristics, and there are challenges in connecting with the international market. China's financial system has developed from a single financial institution in 1978 to the present, with relatively high government involvement and a high proportion of state-owned financial institutions. For this system to be internationally compatible, it needs to be seamlessly integrated with domestic and international financial systems, allowing the free flow of domestic and international institutions, products and investors, and for international market participants to understand and have confidence in the domestic system. On the other hand, China is unlikely to fully liberalise its capital account in the short term. Although the capital account has not been liberalised to affect international financial influence, it can still be promoted from various aspects. Such as not affecting the two-way opening of the financial services industry, partially or even fully liberalising some capital transactions, playing the role of the RMB offshore market and central bank currency swap arrangements to promote the internationalisation of the RMB.

Second, Hong Kong should leverage its status as a financial centre in China. Building an international financial centre is a challenging endeavour. The most successful international financial centres in the world are London, New York, Hong Kong and Singapore. The main differences between the financial systems of the United Kingdom, the United States, Germany and Japan can be attributed to the market system. With the support of the Chinese mainland, Hong Kong, China should play the role of an international financial centre and become the largest offshore RMB market and the largest RMB asset trading market outside the mainland, thus promoting the internationalisation of the RMB.

Finally, establish a "Green Development Programme for the Global South". The programme was designed to match the supply capacity of China's new energy products with the demand gap in overseas markets. Meanwhile, Europe and the United States have imposed export restrictions on Chinese new energy products. Conversely, developing countries have demand for these products but lack the necessary technology, products and capital. China could draw on the Marshall Plan to set up a "Green Development Plan for the Global South" to help developing countries with their green transformation. The programme has multiple benefits. It can address the trade surplus issue, demonstrate China's leadership in global green development, encourage China's new energy products and companies to expand internationally, and enhance China's international financial influence.

Huang Yiping: How to Enhance China's International Financial Influence

Oct 15-2024   



At the end of October 2023, the Central Financial Work Conference (CFWC) proposed for the first time to "accelerate the construction of a financial powerhouse", which should have three main characteristics: high efficiency, soundness and international influence. The Central Financial Work Conference laid out the direction of enhancing the international influence of the financial sector, namely to promote systemic openness, emphasise economic and financial security, and attract foreign financial institutions and long-term capital to China. Enhancing China's international financial influence can be based on the following three aspects:

First, connecting with international financial markets. At present, China's international financial influence faces constraints. On the one hand, China's financial development path has Chinese characteristics, and there are challenges in connecting with the international market. China's financial system has developed from a single financial institution in 1978 to the present, with relatively high government involvement and a high proportion of state-owned financial institutions. For this system to be internationally compatible, it needs to be seamlessly integrated with domestic and international financial systems, allowing the free flow of domestic and international institutions, products and investors, and for international market participants to understand and have confidence in the domestic system. On the other hand, China is unlikely to fully liberalise its capital account in the short term. Although the capital account has not been liberalised to affect international financial influence, it can still be promoted from various aspects. Such as not affecting the two-way opening of the financial services industry, partially or even fully liberalising some capital transactions, playing the role of the RMB offshore market and central bank currency swap arrangements to promote the internationalisation of the RMB.

Second, Hong Kong should leverage its status as a financial centre in China. Building an international financial centre is a challenging endeavour. The most successful international financial centres in the world are London, New York, Hong Kong and Singapore. The main differences between the financial systems of the United Kingdom, the United States, Germany and Japan can be attributed to the market system. With the support of the Chinese mainland, Hong Kong, China should play the role of an international financial centre and become the largest offshore RMB market and the largest RMB asset trading market outside the mainland, thus promoting the internationalisation of the RMB.

Finally, establish a "Green Development Programme for the Global South". The programme was designed to match the supply capacity of China's new energy products with the demand gap in overseas markets. Meanwhile, Europe and the United States have imposed export restrictions on Chinese new energy products. Conversely, developing countries have demand for these products but lack the necessary technology, products and capital. China could draw on the Marshall Plan to set up a "Green Development Plan for the Global South" to help developing countries with their green transformation. The programme has multiple benefits. It can address the trade surplus issue, demonstrate China's leadership in global green development, encourage China's new energy products and companies to expand internationally, and enhance China's international financial influence.