![]() China’s foreign reserves have fallen by about $1 trillion since June 2014 as it bought its own currency to defend it. A devaluation in August 2015 roiled world financial markets and Beijing saw the pace of overseas acquisitions falter in 2016 as China slowed capital outflows to prop up the yuan. There is a lot to be done there.” The Shanghai and Shenzhen stock exchanges are tightly controlled and limit participation by foreign investors.Īlso slowing down needed reforms is the impact of capital outflows on the value of the yuan, or renminbi. “They need to reform IPOs, delisting procedures and corporate governance. The bond market is improving but the stock markets are still a problem and are not representative of the Chinese economy,” Allen says. For example, its capital markets do not work well. ![]() Its capital markets also lag behind, even though China’s two stock exchanges in the Mainland - in Shanghai and Shenzhen - when combined are the world’s second largest by market capitalization, says Franklin Allen, an emeritus professor of finance at Wharton and a professor of finance and economics at the Imperial College London. Despite their huge size, China’s banks lack a major global footprint. For example, its capital markets do not work well.” – Franklin AllenĬhina’s central role as a world factory floor is not matched by advances in its financial sector. SCHOOL MATE 2 SPECIAL 3P LAG UPGRADE“It’s a mid-term program to upgrade the Chinese economy so that Chinese can compete with the world’s advanced economies.” ![]() The aim is “increasing Chinese content of Chinese industry up to 70% by 2025,” says Chi Lo, a senior economist for Greater China at BNP Paribas Investment Partners in Hong Kong. Joining the international system may increase instability and volatility,” he says.Ĭhina’s robust mergers and acquisitions pace is driven not so much by a desire to snap up lucrative assets or the opening of more markets as it is about upgrading Chinese industries with improved technology. “The international system is so unstable and they have become increasingly reluctant to join the system. The lingering effects of the global financial crisis is a key concern. While Xi needs the economy to remain on an even keel, expanding at a fast enough pace to avoid major layoffs, his priorities lie elsewhere, says Pieter Bottelier, a visiting scholar of China Studies at Johns Hopkins School of Advanced International Studies in Washington. State enterprises and private companies, meanwhile, are investing aggressively in strategic areas such as food, energy, robotics and infrastructure.Ĭaution prevails ahead of the party congress. While the country has only gradually eased controls on its capital account and foreign exchange markets, illicit flows of capital are playing an outsized role in overseas real estate and stock markets, and investments by its big corporations are altering the world industrial landscape. However, China’s influence on world markets far outweighs the degree of integration of its own banks and financial markets with the rest of the world. And no matter how much Xi strives to claim the lead in open trade and battling protectionism, Beijing’s commitment to globalization and integration of its markets and financial systems will come on its own terms, at its own pace. ![]() Xinhua, the state-run news agency, declared Xi an “ardent champion of globalization” and the “architect” of China’s plan to connect countries with a 21st century version of the ancient Silk Road.īut the pace of reforms needed in China to push that process forward has been slowing and is unlikely to regain momentum until at least after a key Communist Party Congress in the autumn, or maybe after President Xi Jinping’s next administration presumably takes office in March 2018. “We need to seek win-win results through greater openness and cooperation,” President Xi Jinping proclaimed at the Silk Road event. China’s newly reclaimed role as the “Middle Kingdom,” showcased at a recent gathering of world leaders in Beijing to celebrate China’s “New Silk Road,” should have vanquished any lingering doubts about China’s commitment to weaving its markets and manufacturers more closely into the global economy. ![]()
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