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Chief WTO negotiator anticipates next decade of China (3)

(Global Times)

08:13, September 16, 2011

Financial reform too slow

“Looking back, we realize that China’s financial reform could have been expedited and could have played a more important role in economic restructuring if China had been more open,” said Long.

However, in the shadow of the Asian financial crisis of 1997 and 1998, China’s policymakers considered it too risky at that time to open the financial market too soon.

“We estimated during the negotiations that foreign banks and insurance companies might have a market share of between 10 and 15 percent in China within 10 years,” said Long.

Although there are now some 338 foreign banks operating in China, together they hold less than 2 percent of the country’s total financial assets, according to the American Chamber of Commerce White Paper 2011. By the end of 2010, the market share of foreign-invested insurance companies stood at 4.37 percent in the world’s fastest growing insurance market, down from six percent in 2004, the paper stated.

“Their market share is too low. Looking back, we set too many restrictions and too tight a threshold for foreign banks, insurance and securities firms to enter China at that time,” said Long.

China agreed to fully open its banking system to foreign financial institutions by the end of 2006. However, some restrictive measures still exist, including complicated regulatory approval for new products.

“Due to the lack of foreign competition, China’s banking sector hasn’t become sophisticated enough to transfer large foreign reserves to effective investment. Also, China’s financial industry can’t offer more financial products to people for wealth management. And there need to be more investment opportunities than the volatile stock market and the bubbling housing market,” Long noted.

Had China’s banking sector been more developed and able to provide people, especially young people, with better financial products, people’s spending power and consumption would have been much greater by today, he said.

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