2024 CPPCC paper: Promoting PRC Financial Opening

The newspaper of the Chinese People’s Political Consultative Congress (CPPCC) a Chinese discussion body with broad national representation that meets each March published a paper calling for more opening up of China’s financial sector.

Per the CPPCC Wikipedia article: The Chinese People’s Political Consultative Conference (CPPCC, Chinese: 中国人民政治协商会议) is a political advisory body in the People’s Republic of China and a central part of the Chinese Communist Party (CCP)’s united front system. Its members advise and put proposals for political and social issues to government bodies.^[1] However, the CPPCC is a body without real legislative power.^[2] While consultation does take place, it is supervised and directed by the CCP.^[2]

A tragicomic view of China’s stock investor woes. Look on the bright side.

The stress upon “more opening up” for China is intriguing. Some might wonder if Communist Party General Secretary Xi Jinping’s New Era has brought a definitive end to the Reform and Opening Era launched by Hua Guofeng and Deng Xiaoping. Another recent article, also published by the CPPCC newspaper only the previous day (February 5, 2024), called for more opening up in connection with reform of the Chinese legal system in the area of foreign-related rule by law — that is in both the laws and the administration of the laws. A translation of that article, “Under the New Situation Strengthening the Compliance of Foreign-Related Law with Rule by Law” is available on this blog at 2024: Strengthening Foreign-Related Rule by Law.

China’s current economic difficulties — a faltering stock market, a real estate sector in difficulty and sharply lower foreign direct investment — may be promoting a rethink, albeit one that finds support in its argument for opening in the very thought of General Secretary Xi Jinping. The article on reform of foreign-related rule by law was written the same way. Well that one did mention the PRC Constitution once, but it had far more on the wise, inspiring words of the Leader about the New Era and how those words strongly supported the author’s thesis.

As a person distorted by a petty bourgeois American education, it seemed strange to be reading an article about legal reform and rule by law written in such near-idolatrous language. Thought I should realize that contradictions are the motive force of history as we climb the ladder of the dialectic towards the community of shared human destiny.

If the leader’s thought is being subtly turned on the leader even (different from Mao’s case) while the body is still warm, what is going on (but I am not a good tea leaf reader actually) then it wouldn’t be without precedent. After Mao died, the excesses of the Cultural Revolution (sort of Mao’s autogolpe) were sharply criticized using the very thought of Mao Zedong himself — see 1978: Hu Fuming’s “Practice is the Sole Criterion of Truth” and his Retrospective“.

Gong Liutang: Promoting High Degree of Financial Opening to the World

龚六堂委员：推进金融高水平对外开放

Gong Liutang 龚六堂 is a member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), Director of the Key Laboratory of Quantitative Economics and Mathematical Finance of the Ministry of Education of Peking University, and Vice President of Beijing Technology and Business University.

February 6, 2024

Source: Chinese People’s Political Consultative Conference Newspaper

General Secretary Xi Jinping emphasized at the opening ceremony of the seminar on promoting high-quality financial development for major leading cadres at the provincial and ministerial levels that “since the 18th National Congress of the Chinese Communist Party, we have been actively exploring the laws of financial development in the new era, continuously deepening our understanding of the essence of socialist finance with Chinese characteristics, and pushing forward innovation in financial practices, theories, and systems, accumulating valuable experience, and gradually stepping out on a road of financial development with Chinese characteristics.” General Secretary Xi Jinping has particularly emphasized the need to improve China’s financial resource allocation efficiency and capacity, enhance international competitiveness and influence of rules by expanding opening up to the outside world, and prudently grasp the pace and intensity.

In recent years, China’s financial business has made continuous progress in practical, theoretical and institutional innovations, strongly supporting the development of the real economy and laying a solid foundation for China to build a financial power.

First, the scale of China’s financial continues to expand. At the end of the third quarter of 2023, the total assets of China’s financial institutions amounted to 452.82 trillion yuan, and had already become the world’s largest banking system and the world’s second largest insurance, stock and bond markets.
Second, the added value of China’s financial sector has been rising as a share of GDP, strongly supporting economic recovery.
Third, China’s financial support for the real economy has continued to strengthen.20 The balance of RMB loans granted to the real economy at the end of 2023 was 235.48 trillion yuan, up 10.4 percent year-on-year.
Fourth, financial support for the high-quality growth of China’s economy has continued to strengthen.

China’s international financial cooperation has made positive progress, and financial reform and opening-up have been further deepened, strongly supporting China’s high degree of opening-up.

First, the People’s Bank of China [PBOC, China’s central bank] has actively participated in international financial governance, strengthening dialogue and communication with the International Monetary Fund, central banks and other countries. It has taken the lead in promoting the work of the G20 Working Group on Sustainable Finance. It has further deepened the high-level opening up of the financial sector to the outside world and constructed a regulatory system that is in line with the requirements of high-level opening up.
Second, new progress has been made in the internationalization of the RMB, including further facilitating and promoting the use of RMB for cross-border trade and investment; optimizing the international use of RMB and the network of currency cooperation; promoting the pilot of the integrated local and foreign currency pools; and enhancing the functions of cross-border RMB payments and receipts, trade financing and foreign exchange transactions.
Third, systemic financial risks have been strongly prevented. During 2023 high world interest rates increased enterprise and financial risks. The Chinese central bank established and improved the macro-prudential regulatory framework targeting risks in domestic and international financial markets, and the policy regulation and control have achieved the co-stabilization of the financial and real economy.

At present, in the process of shifting China’s economic development from a stage of rapid growth to a stage of high quality development and accelerating the construction of a new development pattern, it is inevitable that China will face a series of risk shocks and challenges. The “complexity, severity and rising uncertainty of the external environment” pose challenges to China’s financial opening up.

First, the world economic growth is slowing down, and there is a trend of divergence. Expectations of a slowdown in the world economy will affect demand, with demand from all countries showing a slowing trend, and world trade will decline.
Second, the level of world inflation is showing a complex trend, and the global economy is showing high interest rates and high risks. High interest rates have led to a sharp rise in the cost of countries’ sovereign debt and an increased risk of default.
Third, the uncertainty of monetary policy adjustments in various countries has increased.

Financial liberalization is an important impetus for China’s reform and development. Accelerating the construction of a new development pattern requires China to further expand the opening of its financial market.

It is necessary to vigorously enhance the level of systematic opening up of the financial industry, take the initiative to benchmark Chinese measures against international high-standard economic and trade rules, and deepen domestic reforms in related fields.

First, we should build a regulatory system that meets the requirements of high-level financial liberalization and enhance the ability to open up to the outside world at a great extent.
Second, we should improve the national treatment plus negative list management system for overseas investment access.
Third, we should promote the internationalization of RMB in a prudent and solid manner to better serve China’s opening up at a higher level.
Fourth, we should actively participate in global financial governance.

We need to vigorously develop cross-border e-commerce, improve the structure of cross-border e-commerce, and promote RMB payment in cross-border e-commerce. China’s cross-border e-commerce has achieved rapid development, of which the business-to-consumer mode is the mainstream, accounting for 75.65%, while the scale of business-to-consumer accounts for only 24.4%. In the future, we should vigorously develop the business-to-consumer mode of cross-border e-commerce; we should increase the scale of China’s cross-border e-commerce imports; we should promote the use of the RMB in cross-border e-commerce in order to avoid exchange rate risks.

The prudence and independence of monetary policy should be maintained, structural monetary policy should be made more effective, and the cross-cycle design and regulation of fiscal policy need to be precise and efficient. While the global economy is still in a downward spiral, we should focus on the medium- and long-term development of China’s economy and maintain a reasonable growth in the money supply and the scale of social financing.

First, from the long-term perspective of cross-cycle macroeconomic policy regulation, focusing on the mitigation of systemic financial risks, optimize the coordination and matching of the “two-pillar” regulatory framework of “monetary policy + macroprudential policy“, so that the central bank’s policy regulation can better achieve the common stability of finance and the real economy. The central bank’s policy regulation can better realize the joint stabilization of the financial and real economy.
Second, counter-cyclical fiscal policy is a necessary and timely move. Countercyclical policies need to be more pragmatic, precise and flexible, and to maximize high-quality growth at minimal cost, while also taking into account the space for long-term fiscal policy.

We need to emphasize effective risk reduction, in particular by giving top priority to risks in the financial system, and to establish and improve a macroprudential regulatory framework that addresses risks in domestic and international financial markets. Domestic risks should be monitored and identified, including stress tests and risk identification for financial institutions, real estate and local debt risks, to help financial regulators take forward-looking and targeted policy measures in a timely manner. We should monitors and provide warnings about international financial risks, analyzes the ways in which they affect the domestic market, makes comprehensive judgments in the light of the domestic and international economic situation, and adopt forward-looking and targeted policy measures.

龚六堂委员：推进金融高水平对外开放

2024-02-06来源：人民政协报

习近平总书记在省部级主要领导干部推动金融高质量发展专题研讨班开班式上强调：“党的十八大以来，我们积极探索新时代金融发展规律，不断加深对中国特色社会主义金融本质的认识，不断推进金融实践创新、理论创新、制度创新，积累了宝贵经验，逐步走出一条中国特色金融发展之路。”习近平总书记特别强调，要通过扩大对外开放，提高我国金融资源配置效率和能力，增强国际竞争力和规则影响力，稳慎把握好节奏和力度。

近年来，我国金融事业实践创新、理论创新、制度创新不断取得进步，有力支撑实体经济的发展，为我国建设金融强国打下了坚实的基础。一是我国金融规模不断扩大。2023年三季度末，我国金融业机构总资产为452.82万亿元，已经建成全世界最大的银行体系，第二大保险、股票和债券市场。二是我国金融业增加值占GDP的比重不断上升，有力地支撑了经济恢复。三是我国金融支撑实体经济持续加强。2023年末对实体经济发放的人民币贷款余额为235.48万亿元，同比增长10.4%。四是金融支撑我国经济高质量增长不断加强。

我国国际金融合作取得积极进展，金融改革开放进一步深入，有力地支撑了我国高水平的开放。一是中国人民银行积极参与国际金融治理，加强与国际货币基金组织、各国央行等对话沟通。牵头推动二十国集团可持续金融工作组工作。进一步深化金融业高水平对外开放，构建与高水平开放要求相适应的监管体系。二是人民币国际化取得新进展，包括进一步便利和推动跨境贸易投资人民币使用；优化人民币国际使用和货币合作网络；推进本外币一体化资金池试点；人民币跨境收付、贸易融资、外汇交易等功能增强等。三是有力防范了系统性金融风险。2023年世界利率高企、金融风险不断加剧，央行建立和完善针对国内和国际金融市场风险的宏观审慎监管框架，政策调控很好地实现了金融和实体经济的共同稳定。

当前，在我国经济发展由高速增长阶段转向高质量发展阶段、加快构建新发展格局的过程中，不可避免会面临一系列风险冲击与挑战。“外部环境的复杂性、严峻性、不确定性上升”对我国金融对外开放提出挑战。一是世界经济增长放缓，而且出现分化趋势。世界经济放缓的预期影响需求，各国需求呈现放缓趋势，世界贸易会下降。二是世界通货膨胀水平呈现复杂态势，全球经济呈现高利率、高风险的态势。高利率使得国家的主权债务的成本急剧上升，违约风险加剧。三是各国货币政策调整不确定性增加。

金融开放是我国改革发展的重要动力。加快构建新发展格局需要我国进一步扩大金融市场的开放。

要大力提升金融业制度型开放的水平，主动对标国际高标准经贸规则，深化国内相关领域改革。一是构建与金融高水平开放要求相适应的监管体系，提升高水平对外开放的本领。二是完善境外投资准入国民待遇加负面清单管理制度。三是稳慎扎实推进人民币的国际化，更好服务我国更高水平的对外开放。四是积极参与全球金融治理。

要大力发展跨境电商，完善跨境电商结构，推广跨境电商的人民币支付。我国跨境电商取得了快速发展，其中B2B模式是主流，占比达到75.65%，而B2C的规模占比仅为24.4%，未来要大力发展跨境电商中的B2C模式；要加大我国跨境电商的进口规模；要在跨境电商中推广人民币的使用，规避汇率风险。

要保持货币政策稳健性和独立性，结构性货币政策更加有效，财政政策的跨周期设计和调节需要精准、高效。在全球经济仍在下行时期，应着眼我国经济中长期发展，保持货币供应量与社会融资规模合理增长。一是从宏观政策跨周期调控的长期视角出发，着眼系统性金融风险的缓释，优化“货币政策+宏观审慎政策”的“双支柱”调控框架的协调和搭配，使央行的政策调控能够更好地实现金融和实体经济的共同稳定。二是逆周期财政政策是必要和及时之举。逆周期调节政策需要更加注重实效、更加精准灵活，以最小的成本带来最大的高质量增长的同时，也要兼顾长期的财政政策空间。

要切实防范风险，特别是将金融系统的风险作为重中之重，建立和完善针对国内国际金融市场风险的宏观审慎监管框架。对国内的风险进行监测识别，包括金融机构、房地产和地方债风险进行压力测试和风险识别，帮助金融监管部门及时采取具有前瞻性、针对性的政策措施。对国际金融风险进行监测预警，分析其影响国内市场的途径，结合国内外经济形势进行综合判断，采取前瞻性、针对性的政策措施。

（作者系全国政协委员，北京大学数量经济与数理金融教育部重点实验室主任、北京工商大学副校长）