Global Times - 01.08.2019

(Jacob Rumans) #1


B6 Thursday August 1, 2019

By Zhao Xijun


ecently, China announced a slew
of measures to further open its
fi nancial market. The 11 new
measures encourage overseas fi nan-
cial institutions to participate in the
establishment of, and invest in, asset
management subsidiaries of commer-
cial banks. They also allow them to set
up and invest in pension management
companies. Investment restrictions of
overseas personal insurance companies
will be completely scrapped in 2020.
Those measures serve as a milestone,
marking a new stage of China’s fi nan-
cial opening-up.
The fi nancial opening-up has two
aspects. One opens fi nancial institu-
tions and the other frees up capital
fl ows in and out. So far, China has been
making steady progress on both aspects
in spite of industry diff erences. Overall,
the general direction is in line with
opening-up. Eventually the free move-
ment of institutions and capital will be
achieved. What is impossible to avoid
is the risks that come with openings of
both aspects.
On the institutional level, opening-
up will bring competition and regula-
tion pressure for domestic institu-
tions. Freer fl ow of capital could cause
broader risks – market price fl uctuation
and fi nancial market volatility – and
those exogenous shocks often transmit
more fi ercely.
China has taken the bigger step of
opening-up on the institutional level,
which was mentioned during the WTO
negotiations. Insurance and banking
sectors are already open. As long as
they obey Chinese laws and regulations,
foreign investors can come in and es-
tablish insurance companies and banks.
Restrictions still exist in some areas,
such as securities and funds. The new
measures have lifted limitations in
these areas, either in terms of foreign
investment holding ratios or moving
dates forward. More industries such
as professional services, bond rating,
consultancy and monetary brokerages
have all been opened.
On the capital aspect, the opening-
up is mainly centered on projects. The
country attempted to issue B shares to
attract capital, then gradually issued H

shares to help Chinese companies list
overseas and bring overseas investment
back in. In the fi nancial sector, China
has promoted opening-up through
programs such as Qualifi ed Foreign
Institutional Investor, Qualifi ed Do-
mestic Institutional Investor, Renminbi
Qualifi ed Foreign Institutional Inves-
tor and Renminbi Qualifi ed Domestic
Institutional Investor.
It has also been pushing forward the
opening via trading programs such as
Shanghai-Hong Kong Stock Connect,
Shenzhen-Hong Kong Stock Connect,
bond connect and Shanghai-London
Stock Connect. One of the measures
mentioned to further facilitate the in-
terbank bond market will prompt more
overseas investors to purchase Chinese
bonds and make risk and portfolio
management more sound. This mea-
sure is particularly valuable for overseas
institutional investors.
Western media barely paid attention
to these opening measures despite their
great signifi cance. To make matters
worse, they have drawn connections
between the accelerating opening-up
of the fi nancial market and economic
stimulus, or inferred that the opening-
up is simply to absorb trade war impact.
They have even
warned foreign
investors to
“proceed with
the utmost cau-
Some West-
ern countries,
led by the US,
have been
headed toward
isolation and
ism. The
has pulled
out from
tions. Brex-
it will
isolate the
UK from

globalization. Populism has been rising
in some other Western countries.
US policymakers believe globaliza-
tion has not been benefi ting the US.
Against this backdrop, Western media
is not focused on opening-up any-
more. The negligence and distortion of
China’s fi nancial opening-up measures
are the result of Western countries’
political ideological changes.
Opening-up has a positive eff ect
on economic development. A country
opening up and embracing the outside
world should not be seen as dubious or
of lacking righteous motives. The US
couldn’t have developed rapidly after
World War II without implementing
opening measures. Multinational corpo-
rations couldn’t have made huge profi ts
without them. Consumer products in
the US couldn’t have been priced so low
so as to benefi t the entire society.
China is the only country that
has not experienced major fi nancial
crises. The country is also the main
contributor to the global investment
market. China has led the world in
wealth growth, the investment market,
resident deposits and other fi nancial
sectors. According to the Global Wealth

2018 report released by the Boston
Consulting Group, personal wealth in
Asia grew by 19 percent to $36.5 tril-
lion, with Chinese residents holding 57
percent of that total.
The 40 years of reform and opening-
up have created a high-speed growth
of the Chinese economy and the fast
improvement of household income and
the standard of living. China and its
people have fully enjoyed the benefi ts
brought by opening-up and are willing
to continue this process. Meanwhile,
China hopes to promote this experience
to other developing countries to benefi t
their economies. Further opening-up
will bring about more effi cient resource
allocation and dividends. While the
industrial chains and other value chains
that can boost economic development
have formed and operated eff ectively,
no country can do everything in isola-
tion and without cooperation.

The author is deputy director of the
Financial and Securities Institute,
Renmin University of China. bizopinon@

Travel ban just one of many options involving Taiwan

China’s fi nancial opening-up has righteous motives despite Western skepticism, distortion

By Hu Weijia

The trial run of a program un-
der which residents from 47
mainland cities can visit Taiwan
as individual tourists will be
suspended starting on Thurs-
day. The mainland-based Asso-
ciation for Tourism Exchange
across the Taiwan Straits said
on Wednesday that the decision
was made based on the current
situation of cross-Straits ties.
Taiwan leader Tsai Ing-wen
has openly rejected the “one
country, two systems” frame-
work as the way to settle the

Taiwan question. Beijing won’t
always show tolerance for Tsai’s
The suspension on indi-
vidual travel is an economic
card played by Beijing to give
a warning to Taipei. The main-
land is an important source of
tourists for Taiwan, with more
than 1.6 million mainland visi-
tors reportedly arriving in the
island in the fi rst half of the
year, up 28 percent from a year

earlier, according to the data
from the transportation and
communications authority
of Taiwan. Suspending tour-
ist travel permits to Taiwan will
deal a blow to the already weak
economy in the island.
The ban sends a clear signal
to Tsai. Due to her hard-line
stance against the Chinese
mainland, Beijing won’t con-
tinue encouraging Taipei to en-
joy the economic driving force
from the mainland by promot-
ing cross-Straits economic co-
operation and interaction.
Taiwan’s heavy dependence

on the mainland economy
gives Beijing plenty of econom-
ic options in cracking down on
Taiwan secessionist forces. Sus-
pending tourist travel permits
is just one of those options.
Many are trying to guess
what economic card Beijing
will play next. However, this
may not be the most impor-
tant question. Considering the
recent military exercises of the
People’s Liberation Army, Bei-
jing is not just thinking about
playing simple economic cards
to crack down on Taiwan seces-
sionist forces.

The US in early July ap-
proved possible arms sales to
Taiwan with an estimated value
of $2.2 billion. We advise the
US not to meddle in China’s
internal aff airs at this sensitive
moment. Beijing has a com-
plete set of strategies regarding
the Taiwan question, and the
ban on individual travel is just
a small part of the story. Can
Taiwan and the US guess what
happens next?

The author is a reporter with
the Global Times. bizopinion@

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Illustration: Luo Xuan/GT
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