10 Proposals for Further Deepening Reform: Financial System Reform

Shenzhen Innovation and Development Institute (SZIDI) released the China Reform Report 2017 in May 2018. Entitled Reform on Route, this year’s report evaluates twelve major aspects of the reform process in 2017, concludes reform experiences from the past five years and makes predictions on the future trend of reform in 2018 with ten policy recommendations. The report identifies 2017 as a crucial year during which series of planning and design culminate into implementation, and historical breakthroughs and periodical progresses rise to the surface.

The report argues that in order to avoid systematic financial risks and to maintain financial stability, it is essential to launch reforms in financial system and further opening-up the financial sector. In particular, the report emphasizes that China should

l eliminate and control the riskiest issues in the financial system such as high leverage, large scale of shadow banks and severe systematic risks across industries, in order to set the stage for further opening-up

l further opening-up in financial sector to urge for further reform in the financial system through promoting

n marketization of RMB

n internationalization of RMB

n further opening-up in banking, securities, and insurance industries

l prevent excessive speculation in capital and real estate market, through

n securitization of finance

n resolving the systemic flaws in the A-share main board and the New Third Board

l control and eliminate local debts by

n resorting to administrative measures such as setting debt limit and calling off some development projects

n transforming government functions and continuing economic system reform to make market the decisive role in resource allocation