Regional Financial Safety Under China's Regime Transformation Background: Roles And Functions Of Government

Taking banking industry as an example, this paper analyzes roles and functions of government and regional financial safety under the background of China's regime transformation. Based on empirical approaches and relevant theories, this paper tries to clarify the actual and expected roles of the government regarding the issue of regional financial safety.Chapter 1 introduces the theme, scope and structure of the research, and provides the definitions of a series of concepts in relation to regional financial safety and the academic meaning of the"Regional".Chapter 2 discusses the historical reasons for China's uneven regional development, and the function of government in the formation of this situation. Based on the analysis of government's uneven development strategy, using financial support policy as a substitute for recessive tax adjustment, and different economic and financial relationship between developed and under-developed regions, the author finds out that the intervention of government has helped achieving fast economic development on the cost of financial development as a serving tool, and unevenly regional development as an outcome.Chapter 3 discusses the role of China's government function in the agglomeration of regional financial risks. In transitional period, the government plays a dual-role as both social administrator and the owner of State-owned enterprises (SOEs), thus will inevitably assume various, and sometimes conflict responsibilities, such as requiring banks to undertake fiscal functions, providing invisible guarantee for banking, selecting manager for SOEs, strengthening discipline and examination of banking operation, and exerting direct and indirect intervention on the management of state-owned banks from both central and local governments. Eventually, these interventions had resulted in the agglomeration of banking risks and regional discrepancies of China's banking sector. Chapter 4 discusses the necessity of the regional financial safety by the government. Through analyzing financial frangibility and negative externality of the regional financial safety, the author points out that even a matured market-economy cannot automatically realize and sustain the regional financial safety. On the country, regional financial safety depends on necessary public good provided by government.Boundaries of government's power in providing regional financial safety have been fully gone through in Chapter 5. Government will certainly exert its administrative power to intervene the economy operation in order to secure the regional financial safety; therefore, the extent and boundaries of the visible hand become an important issue. The author proposes three reasonable boundaries of government functions under China's transforming regime, namely the depth, the width and the strength of which respectively refer to the boundary between government and market, the boundary between central government and local governments, the extent of government intervention to the market. The government should not intervene in fields where market and local governments are functioning well; besides, the government should comprehend the historical dynamic features of boundaries between government and market, central government and local governments. Finally, government should not intervene in regular operation of market even under the condition of market failures, if such losses are acceptable.Chapter 6 discusses the accomplishment and objectives of governmental functions to secure regional financial safety under China's regime transformation. Considering the abstract, dynamic and endless characteristics of the regional financial safety, the author considers that the accomplishment and objectives of financial regulation depend on taking account for various functioning factors in different periods as well as consistent efforts. The above accomplishments and objectives can be reified as different intermediary targets according to the whole process. Under the special background of regime transformation, and on principles of"self-discipline rather than hetero-discipline; market rather than government; prevention followed by mitigation", this paper proposes six intermediary targets, which include promoting self-immunity system of risk prevention in financial institutions; guiding financial industry to establish self-governing and self-discipline system; introducing market-discipline system; enhancing healthy market environments for financial sector, strengthening effective financial regulation and supervision, and improving the financial safety-net against financial crisis. Finally, this paper further provides the theoretical, empirical foundations and the focus of the above six interim targets.The final Chapter discusses the issue of government's evaluation of regional financial risks. Government needs to fully and accurately evaluate and understand the risk status on a timely basis in order to provide the public good- regional financial safety. This paper applies multi-level fuzzy evaluation and fuzzy cluster analysis approaches to individual financial institutions, and establishes the risk-assessing index system for regional financial risks. Finally, the author provides an empirical analysis of Guangdong financial risks in 2005 with the above methods.In conclusion, this paper put governmental functions under the background of China's regime transformation, on the basis of empirical observation of history and related economic theories, clarifies the governmental functions in regional financial safety during regime transformation period, and provides an answer to the issue as to how government should function in sustaining regional financial safety. The author sincerely hopes this paper could contribute to the research and development of related theories.