Move seen as win-win scenario for global institutions, domestic sector
China will remain committed to opening its financial industry and market despite a more turbulent global financial landscape, a point that was reiterated at a recent high-profile meeting, experts said on Thursday.
Among the key focuses of the country's financial opening-up in the coming years would be further aligning domestic regulations and standards with global standards, better managing risks related to cross-border capital flows and steadily advancing renminbi internationalization.
They said that such efforts will reinforce a win-win scenario whereby global financial institutions capitalize on China's vast growth opportunities, while the country's financial sector can achieve high-quality development to better support its modernization endeavors.
Their comments came after the central financial work conference that concluded on Tuesday. The meeting highlighted the importance of promoting high-standard financial opening-up while ensuring national financial and economic security.
It was decided at the conference that China should steadily expand institutional opening-up in the financial sector, facilitate cross-border investment and financing and attract more foreign financial institutions and long-term capital to invest and operate in the country.
The People's Bank of China, the nation's central bank, stressed at a meeting on Thursday the need to steadily advance financial market institutional opening-up, vowing to deepen reform and opening-up of the foreign exchange market and expand financial market connectivity between the Chinese mainland and Hong Kong.
All of this signals that the momentum of accelerated financial opening-up in recent years will continue, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.
Wang said he expects efforts to focus on advancing institutional opening-up, which means that rules, regulations, management and standards in financial industries and markets would become more in line with global norms and encourage more foreign financial institutions to expand business in China.
Recognizing that China has already taken essential steps to open up its financial industries, Achim Kassow, a member of the board of management at Munich Re, a German reinsurer, said further improved clarity on regulations and acceptance of global business models would provide a more predictable business environment.
China has rolled out a series of financial opening-up measures since 2018, including removing ownership caps in the fund management and securities industries. According to the China Securities Regulatory Commission, nine securities companies with foreign majority stakes and nine wholly foreign-owned fund management companies have been approved to operate in China.
Pan Yuanyuan, an associate researcher at the Chinese Academy of Social Sciences' Institute of World Economics and Politics, said that while deepening institutional financial opening-up would help China attract more long-term capital, the associated risks regarding cross-border capital flows should be well addressed.
It is crucial to guard against the negative impact of short-term speculative money, which can flow in and out quickly and in large amounts, reducing its shock to the economy and financial markets, Pan said.
Global financial market volatility has intensified amid major central banks' sharp monetary tightening to curb inflation and a rise in geopolitical tensions, with the onshore renminbi weakening by 5.27 percent against the US dollar so far this year to 7.3179 as of Thursday evening.
It was stressed at the central financial work conference that the management of foreign exchange markets should be strengthened so that the renminbi exchange rate can remain generally stable at a reasonable and balanced level. The meeting also called for efforts to push forward renminbi internationalization in a cautious and steady manner.
The overall direction of continuing to internationalize the renminbi remains unchanged, said Lou Feipeng, a researcher at Postal Savings Bank of China.
The focus going forward should be on facilitating trade and investment, supporting the healthy development of the offshore renminbi markets and enhancing the ability to manage risks under open conditions.