The Governor of the People’s Bank of China recently asserted that openness and reform would be crucial to making China’s financial sector more competitive in the world. In a session on the Global Implications of China’s Financial Reforms on the first day of the 11th Annual Meeting of the New Champions, Jing Ulrich, Managing Director and Vice-Chairman for Asia-Pacific at JPMorgan Chase & Co., Hong Kong SAR, agreed.
“China is very much opening banking, insurance and capital markets,” Ulrich explained. “Competition will make Chinese companies more competitive. But regulators will pursue opening slowly. Noting that MSCI decided this month to include China A shares in its Emerging Markets index starting next year, Ulrich described it as a “symbolic move”, arguing that “the initial weighting will be very small.” Foreign investors, she pointed out, are now able to access the China market through more channels, including the mainland Stock Connect programmes.
“How can we really learn from competitors?” asked Li Fuan, Chairman of China Bohai Bank in the People’s Republic of China. “The only way is to open up.” Chinese banks are already very open, asserted Li Daokui, Dean of Schwarzman College at Tsinghua University, People’s Republic of China. Banking regulators 10 years ago already allowed for foreign strategic investments in Chinese banks. Now, Chinese banks can be 100% foreign-owned.
“At one level, what China is doing is crazy – getting the financial system fixed first,” asserted Eswar Prasad, Professor at Cornell University, USA. “The checklist of things to do is very difficult.” He added: “Capital account opening as a catalyst for domestic reform is crucial. But it is bigger and requires a bigger communications strategy.”
“Leverage is not that high, but is growing at a rapid pace,” Li Fuan reckoned: “It is very important to strengthen our regulations and that will keep us competitive.” Ulrich said: “If you don’t understand the nature of the debt problem, how can we solve it? Maybe local governments should be raising more bonds. Fiscal reform is part of the deleveraging process.”
For JP Rangaswami, Chief Data Officer of Deutsche Bank, United Kingdom, “it all comes back to data.” There is so much of it. “The cost of storage has come down and we are now better at storage.” Artificial learning and intelligence are creating new ways for financial companies to harness the data and find useful new ways to engage with their customers.
The World Economic Forum’s 11th Annual Meeting of the New Champions is taking place on 27-29 June in Dalian, People’s Republic of China.