McKinsey advocates continued opening of China's financial markets

What measures are needed if China wants to further open up?

I think that there are a few areas that would be interesting to look out for.

First, China can continue to liberalize its services sector. Services are a growing part of China's economy, accounting for 54 percent of GDP in the first half of 2018, compared with 44 percent in 2010.

However, labor productivity in China's service sector is about 10 to 30 percent of the Organisation for Economic Cooperation and Development average, suggesting that there could be a big prize if China could boost productivity in its service sector.

A key way of achieving this is further liberalizing trade in services. Our McKinsey Global Institute research found that services are growing faster than goods trade, and are already more valuable in global trade than is commonly realized.

Supported by improved institutional capability and competition, further liberalizing China's service sector could deliver a substantial boost to the Chinese economy through improved infrastructure, increased efficiencies, lower prices, and faster innovation. The world would benefit from a larger, faster-growing and more liberalized Chinese service sector.

Second, the continued opening-up of China's financial system. Today, foreign participation in the financial services sector is low. Foreign ownership in the Chinese banking system - the world's largest at $39 trillion - is less than 2 percent, compared with about 13 percent in the United States. Foreign ownership in the Chinese stock market (the world's second-largest) is less than 3 percent, compared with 22 percent in the US and 32 percent in Japan.

Moving more boldly ahead to integrate China's financial system with global markets would reduce the risk of excess domestic liquidity and relax the constraint of the "impossible trinity" - that is, simultaneously seeking to control monetary policy, exchange rates, and capital movement.

This would also have the benefit of developing a more global set of options for China's savers, including investment in OECD economies that are suffering from a savings gap. Domestic savers in China today continue to face a lack of investment options. Historically, Chinese households have tended to have lower rates of return on their financial investments than their global counterparts.

Third, China can be a major player in shaping a new framework for global prosperity. The rules of the game underpinning the global economic system and governance are in flux, yet international cooperation is still vital to preserve and increase prosperity and sustainability.

A consensus among world economic powers on what constitutes fairness in competition, intellectual property rights, data governance, inclusive growth and environmental sustainability requires a new comprehensive deal, and China can help to shape it.

Among the many areas that need urgent attention are: designing a new multilateral trade system, tackling global climate change, reaching consensus on digital governance (such as data sovereignty), and filling the world's estimated annual $350 billion infrastructure investment shortfall.

China has already indicated its interest in playing a greater role in defining the new rules of the game, by establishing new institutions, mobilizing capital through its Belt and Road Initiative, and participating in international climate agreements.

However, much remains to be done.

Has competition become intensified between your company and your Chinese counterparts?

In our industry, management consulting, it is crucial to have scale and a global footprint. Our Chinese clients want to understand innovations and best practices from around the world. With our presence in more than 60 countries and over 14,000 consultants, we are able to mobilize our global network and experience for our clients as "One Firm".

This capability is not easy for local Chinese companies in our industry to replicate, at least not yet.

We actually work with many Chinese companies as collaborators. For example, sometimes we will form a consortium of different firms to jointly help our clients.

We are building ecosystems with many specialized partners, who contribute different expertise and skills.

In the end, I think of Chinese companies as collaborators, much more so than as competitors.