Economist recommends widening of economic reforms

LONDON - A leading economic expert has recommended that China deepen and widen its economic overhaul to create a stable platform for the reform of its financial centers in the coming 10 years.

Paola Subacchi, the research director of international economics at the Chatham House think-tank in London, is to deliver her advice on financial reforms at the Lujiazui Forum which started in Shanghai on Thursday.

Among attendees at the Forum are representatives from the People's Bank of China and China's Regulatory Commissions for banking, securities, and insurance.

Before her departure for Shanghai, Subacchi told Xinhua that China has a very strong banking sector, but less developed capital and bond markets and therefore, reforms to strengthen these areas would benefit China.

Without a mature financial sector with enough liquidity, the capital account can never be fully opened up, which makes financial reform a necessity for China, she said.

"You can allow inflows and outflows only when you feel that your domestic stability cannot be jeopardized by sudden events and a sudden shock, so you need a mature financial sector."

Reforms of currency, exchange rate and interest rate should all go hand in hand, she said, advising a broad set of reforms and a progressive approach to avoid presenting a risk to China.

"The gradualist approach of the Chinese authorities is such that I don't think there will be a leap forward, to make things ready before 2020 because of the risk in this process. This is a policy-driven process. There is a lot of policy discussion and debate," the economist said.

She said that the goal of building Shanghai a major financial hub by 2020 provided a viable timeframe for the reform.

"Ten years is a reasonable timetable for completing this reform. It is a step-by-step reform, it has started and it will continue. In the last year there have been significant steps for more liberalization," she said.

An opening up of the financial sector would see four major financial centers - Shanghai, Hong Kong, Taipei, and Shenzhen - as its pillars.

Hong Kong has already enjoyed a status as a major global financial center, and over the past two years it has quickened the pace to become a major center for China's yuan.

Subacchi advised that China also look for more connections with fellow BRICS nations -- Brazil, Russia, India and South Africa.

Shenzhen, a regional and domestic center, has a strong advantage in small and medium enterprises and should continue developing its market for SMEs, Subacchi said.

There is no doubt that Shanghai will eventually become a major international financial center, but when this happens it "depends on the opening up of the capital account," she said, suggesting Shanghai authorities explore ways to beef up foreign investors confidence in its financial system.