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Financial Liberalization And China's Financial Opening Up

Posted on:2006-10-17Degree:DoctorType:Dissertation
Country:ChinaCandidate:L Z JiaFull Text:PDF
GTID:1116360152490929Subject:Political economy
Abstract/Summary:PDF Full Text Request
Since the 1980s of the 20th century, economic globalization and financial liberalization have become a notable macro trend in the development of world economy, which has affected all the countries including China. The cross-border flow of economic resources (including merchandise, capital, labor, technology, information, etc.) has lead to the increasing mutual dependency and influence between the economy of an individual country and that of the whole world. Due to historical reasons, each country has experienced a period in which the financial department would be inevitably under the control of the government. As is known, regulation brings distortion to economy, while liberalization represents efficiency. Today, the developed countries that have well realized financial liberalization are benefiting from the liberalized and efficient financial market, but the question puzzling the developing countries that are still in their different periods of financial reform is: How to perform liberalization smoothly and benefit from it? Likewise, this question puzzles China—the largest developing country in the world. Our country is now a member of WTO, which means that it acknowledges the basic contents of the General Agreement on Trade in Services. In line with its commitments, it is its obligation to liberalize its domestic market, so as to bring it into the market system of the whole world. We should say that financial liberalization, an absolute need that has been justified by the practice of each country, is an inevitable option for the development and boom of modern economy. This, however, does not mean that financial liberalization itself will automatically facilitate economic development. The key is how to deal with the relationship between regulation and liberalization in the new environment, and take back larger share of profit from the economic globalization and financial liberalization. This has become a very pressing and practical issue. We combine the empirical study and the comparison study in this paper. By analyzing the theories of finance liberalization and their scientific value, and making an empirical study on the various schools of finance liberalization and their applicability, we draw the conclusion. The paper also compares the finance liberalization practice between the developed and the developing countries, envisages the key problems in the financial reform of China and puts forward the practical strategies and measures on the finance liberalization in China. The paper begins with the review and analysis on the theories of finance liberalization, traces the historical development of the finance liberalization theories and draws an outline, that is, the economic development and the economic transformation as well as the process of the finance liberalization are a complicated social and systematic transformation, not only an issue of technological growth, which adopts macroeconomic variables. There is no pure finance liberalization in the world. There is only conditional finance liberalization in the various countries, even in the developed countries. Any blind and hasty liberalization will only lead to economic instability and crisis. The main content in this paper could be divided into three parts. The first part deals with theoretical study. After the first chapter Forward, much ink is used in the second chapter to analyze the theoretical basis, source and development of the finance opening-up and liberalization theories and then the paper reviews the related literature. By analyzing the different schools of the finance liberalization theories, the paper makes a detailed study on the contributions of different economists and the popularity of the different schools in practice. By analyzing the main contents of finance liberalization, the paper defines the intension and extension, the developing manner, the economic returns, the implementing procedures, the preconditions, etc. of the finance liberalization. Therefore, the first part could be regarded as a systematic theory study, which not only paves the way for the study on the finance liberalization in China in this paper, but also provides us with the different theoretical outlines and some enlightenment in the related literature review. The second part is the demonstration analysis. Chapter 3 gives a comprehensive analysis of the return and cost of financial liberalization. By comparing the experiences and lessons obtained from the applications of financial liberation between the developed countries and developing countries, people are inspired by a series of successful implementations of financial liberalization. The author analyzes the financial crisis, the byproduct of the financial liberalization application from the economic point of view. After the analysis, we find that the risk returns in the developed countries and developing countries brought by financial liberalization are different. The demonstration analysis shows that those developing countries are in an inferior position during the process of financial liberalization and face the awkward choices. If they are not continuing to carry out the opening up policy, these developing countries will land themselves in a passive position on the international economic stage and be thrown off by the world economy trend. On the other hand, if they do carry out the opening up policy, however, they are incapable to precisely grasp the future implementation strategy due to a series of reform setbacks. We hold that facing the above dilemma, the only thing the developing countries could do and also the only right choice for them is to follow the direction the financial liberalization stoutly and firmly believe that there is no hope without the reform. The third part is the countermeasure analysis on the strategic issues and key issues of China's financial liberalization. Chapter 4 scientifically judges on the opening degree of Chinese finance. Based on this, the author designs the optimum model of China's financial liberalization. Through the demonstration judges, we draw the conclusion that China's financial liberalization did not start from scratch. It has experienced a certain period of financial liberalization. Nevertheless, China, as a successful model of reform by the phased approach, its reform at the early stage did not lay a solid foundation for the reform hereafter and many unsettled issues are remained. Therefore, China's financial reform must break through the restraining on finance formed over a long period of time and tend towards a more liberal market-oriented direction in order to effectively overcome the efficiency loss due to the financial restraining and promote the better development of the finance industry.In the paper, the author put forwards that under the background of globalization and when a new variable, namely open economy is introduced in China during the process of financial reform, the beginning reform of China's financial liberalization should revise the previous reform methods strategically and enter into the fast developing lane. Only in this way could China realize the optimum arrangement of financial liberalization. Chapter 5 is the key part of the article, discussing some crucial issues to be addressed during the process of the financial opening-up in China. Based on the requirements of the study and logical deduction, we carried out study and analysis on a wide variety of issues ranging from the reform of the state-owned banks, building a market-orient interest rate system, exchange rate system, opening up of capital items of RMB, maintaining the independence of the monetary policy, risk prevention and financial regulation. All these issues hindered the process of economic restructuring in China and have to be solved in order to deepen the financial reform. The innovation made in this article can be summarized as: The financial liberalization is the process that all the countries (or regions) open up their financial market through the adjustment of the systems. The essence lies in the fact that all these countries have to break the traditional financial regulation in a bid to forming a unified international financial market and operation system and guaranteeing the free movement and rational allocation of the financial capitals within the globe. It includes both the liberalization of domestic market (namely abolish the regulations against the interest rate and credit allocation) and that of the international financial market (eliminate the capital regulation and restriction on the foreign exchange). Based on the definition of the financial opening up, financial liberalization and financial fragility, a comprehensive analysis has been made in this paper including the theory and policy, management and operation, experiences and lessons, foreign case study and the practices in China. A premium model suitable for China is introduced with the consideration of the core ideas of the financial liberalization. Moreover, a lot of work has been done to sum up the practices of opening up the financial market in China and analyze the strategy involved. Some constructive and feasible suggestions are put forward to stimulate the opening up of the financial market and achieve a breakthrough in this area after China's entry into WTO.
Keywords/Search Tags:financial opening-up, financial liberalization, financial regulation, financial crisis, financial fragility, interest rate, exchange rate, monetary policy, risk prevention, financial supervision
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