Zhang Monan

Tapping development potential

By Zhang Monan (China Daily)
Updated: 2010-04-26 08:03

As its influence keeps rising on the international stage, China should create a set of scientific finance and economics theories suitable for its national conditions. Both a scientific assets assessment system and an industrial and financial capital pricing mechanism are needed to prevent the country's economic development from being excessively swayed by the West-dominated international pricing system.

China has a long way to go to become a financial power. Over the past year, the country has scored a remarkable achievement in pushing forward financial reforms and in greatly raising the capital adequacy rate of domestic financial institutions and their profit-making capability. However, the country's financial institution building remains in the primary stage and its capital utilization efficiency at a comparatively low level. Compared with foreign counterparts, China's domestic financial bodies have yet to improve their competitiveness.

The absence of a scientific pricing system on financial assets still puts an insurmountable obstacle to the further development of its financial sector. On top of the country's financial agendas is to push for the change to direct and indirect financing for its financial sector.

In addition to some challenges to China, the global financial crisis also offers a rare opportunity for the country to step up its global capital strategy. To gain an initiative in restructuring the unbalanced global capital market, China should try to convert the crisis into an opportunity and actively push its industrial, commercial and financial capital to go global. That will help remove long-standing factors that put China at a disadvantage in the global division of trade and finances, increase the country's return ratio for capital investment and develop China into an intensive economy.

Given that the dollar-dominated global monetary system has occasionally experienced fluctuations, China should make efforts to optimize arrangements of its enormous foreign reserves and try to diversify its overseas investment.

Greater efforts should also be made to further push for the country's overdue industrial merger, such as thoroughly integrating its financial and industrial capital. Expanded overseas acquisitions will improve China's industrial effects and reduce pressures brought by dwindling external demand. The country should also capitalize on the drop in international energy and resources prices to build a cheap resources reserve for its industrialization and set up a stable supply and pricing mechanism.

The author is an economics researcher with the State Information Center.

(China Daily 04/26/2010 page8)