China is moving toward the next stage of development through a new round of economic reforms, and transforming China's financial sector is essential in rebalancing China's economy.
The on-going economic reforms have been receiving a great deal of attention both in and out of China. Transforming the growth model is vital for China's long-term development, and the reform is also critical for the global economy because of the important role China plays.
Reforming China's financial sector is widely regarded as a key factor in facilitating China's rebalancing away from an export-driven to consumption-led economy and sustaining strong economic growth.
Timothy Adams is the current President and CEO of the Institute of International Finance (IIF) and a former Undersecretary for International Affairs at the U.S. Department of the Treasury, where he was the George W. Bush administration's point person on international financial and economic issues. He recently shared with me his perspectives on the role financial reform plays in transitioning China to a better balanced and more sustainable growth model.
Zhenyu Li: As you know, it is almost a consensus among economists that economic reforms would be vital, or to say, the only way to put China on a more sustainable footing. And reforming China's financial sector is considered a top priority. So what's your take on China's financial reforms?
Timothy Adams: First of all, I do agree with that statement that China has witnessed and experienced remarkable economic growth for the past 30 plus years. But that growth model, which was so important in achieving China's great prosperity that exists, that growth model needs to adapt and change so that the next 30 years can experience the same kind of economic progress.
Financial sector reform is a key ingredient in a new growth model. And that key ingredient is about better allocation of savings to new growth industries, allowing households and individuals a more diversified and safer portfolio of savings and also allowing households greater returns on their savings, which raise their incomes and allow them a higher standard of living.
So, for China to transition to a new growth model, which is happening and is a priority for the Chinese new leadership, for that to happen, financial sector reform has to be a part of the changes that will lead to a new growth model.
The financial reform is of great help in transforming the Chinese economy to more of a consumption-led growth model and allowing market forces to play a greater role in capital allocation. But how will this process actually happen? IIF President Timothy Adams will air his opinions on China's capital market reform in our next episode.
(This is a reprint from the People's Daily Online of the September 11, 2013 edition.)