Research team on China's Financial Reform Strategy, by Wang Gang, Ren Haocong, and Lei Wei

Research Report No 179, 2014 (Total 4678)

Abstract:

The financial regulations and monetary and fiscal policies are three major ways the government has used to regulate the economy, and the government cannot deal with risks or challenges in economic changes without effective financial regulation. Major factors having an impact on the efficiency of China's financial regulations are:

First, implicit guarantees are common in China's financial system, with admission barriers and unfair competition restraining competition in the industry, so the external environment for financial regulation needs improvement. Second, regulators encounter contradictions in their objectives and find it difficult to strike a balance in practice. Third, regulators lack independence, resources, an effective accountability mechanism and a sound governance system. Fourth, the current regulations and administrative controls are incapable of adapting to the rapid development of mixed businesses in the financial sector, resulting in regulations overlapping or missing and a shortage of cooperation and an information sharing arrangement. Fifth, some similar financial organizations are developing rapidly and have increasingly close relations with the standard financial system, so they will have a great influence on regional financial stability, but there are no unified regulations or standards for such organizations.