The Transformation of Finance: The Voice of Niagara

Author: Xu Dianqing
Publisher:
Publish Date: 2005-05-01
Features: In economics, there is a principle that needs no proof: competition brings efficiency. In other words, the stronger the monopoly, the weaker the competition. China's financial reform must break monopolies and open up private banks. Finance is the most sensitive fortress in China's economic reform, with many difficulties and risks, but we must not let the fear of risk paralyze us, because the greatest risk is to be paralyzed by the fear of risk! —Author's Preface
The low-efficiency growth of China's economy has been sustained due to the monopoly of state-owned commercial banks under high savings rates and foreign exchange controls. Once these conditions no longer exist, the various loopholes in the financial system and the resulting black holes in funds will become exposed. The conclusion that must be drawn is: before China fully opens its RMB business to foreign banks in 2006 and the arrival of population aging in 2012, it must urgently establish a financial system suitable for a modern market economy.
Based on the experience of industrial and commercial enterprise reforms, the reform of the banking sector should also introduce private banks while reforming state-owned and quasi-state-owned credit institutions. Internal openness should be achieved before external openness; actively and steadily establish a number of private banks. —Wu Jinglian
Professor Xu Dianqing has long taught and conducted research overseas, gaining a detailed understanding of the lessons from various countries and a different perspective on issues compared to domestic economists. I highly value his research findings. We both believe that internal openness must be gradually achieved before financial openness. To accelerate financial reform, it is essential to break industry monopolies and introduce competitive mechanisms. —Liu Guoguang