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Accelerate Financial Innovation to Build China into a Strong Global Manufacturing Power


Accelerate Financial Innovation to Build China into a Strong Global Manufacturing Power

By Wu Qing, DRC


The Guiding Principles on Building China into a Strong Global Manufacturing Power with Financial Support clearly indicates for the first time that the government needs to strengthen financial service to support manufacturing industry, which can enhance the upgrading and transformation of manufacturing industry as well as the improvement of its quality and efficiency on the basis of expanding the scale.

China's financial industry is not well developed in terms of its insufficient institutional types, limited service items and inadequate products. Its underlying reasons are related with the regulation concepts and management models. The excessive supervision will hinder motivation for innovation, while inadequate supervision will bring about other problems, such as P2P. The government needs to formulate relevant rules to remove non-standard financial institutions from the market.

The guiding principles point out that the government needs to establish and develop group financial companies in a normal manner. These companies will be new financial entities with new functions and a socialized model of operation. This policy measure will make financial organizations become more diversified.

Financial leasing industry is particularly helpful for enterprises to expand investment in fixed assets and contribute to the upgrading of manufacturing equipment. It is a relatively mature financing model in China with an increasing scale of development. The government needs to provide more incentive measures and relax the supervision so as to promote its performance.

An important way to solve the problem of corporate loans is to use risk premium. The banks can compete for the relatively high-risk business, and use more revenue to offset the loss caused by the risks.

Developing direct financing is the development direction for the reform of China's financial system. Compared with indirect financing, direct financing is more market-oriented and more flexible, and it is easier to be innovated because its rules are formed by market participants rather than formatted contracts.