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Huang Yiping: Financial reform will continue to be a key feature of the Chinese economy in 2019.


China has continued with the policy of reform and opening-up over the past 40 years. The private sector, with government's support, is gradually playing a bigger role in China's economy. Professor Huang Yiping, chairman of the CF40 Academic Committee and deputy dean at Peking University's National School of Development, said financial reform will continue to be a key feature of the Chinese economy in 2019.

Huang is also an author of "Strengthening Market Mechanisms to Build a Modern Financial System in China", where he mentioned that things have now changed in China and innovation has become extremely important.

Internal economy: High leverage ratio not a big concern, financial sector needs restructuring
"The financial system needs to be restructured," Huang said, adding that "regulation in old ways is no longer work, the regulation system needs to be upgraded."

China's commercial banks have established specialized institutions to provide financial services and are encouraged to increase the proportion of financing for small-and-medium-sized enterprises (SMEs).

Another benefit to private sectors is tax cuts to support them in expanding their businesses. In the first quarter of 2018, private enterprises enjoyed a total tax cut of 143.7 billion yuan, up 41.3 percent year-on-year.

"Financial reform depends on many changes, for example, the state-owned sector reform. The government now talks about competitive neutrality, I think sometimes this can be materialized, but before the SOEs can be effectively liberalized, I think financial reform should move at a similar pace," Huang added.

While the global economy is slowing down, global debt in both public and private sectors reached a record high of 152 trillion U.S. dollars, according to IMF 2018 report. It seems that many people are concerned that the high leverage ratio will tear up the economy.
"High leverage concentrates on two sectors, state-owned enterprises and local governments, both are linked with government support," said Huang. "While high leverage is worrisome, it will reduce efficiency going forward, but I don't think it is an imminent problem that we should worry about in the near future."

"Now financial business becomes more complicated while cross-selling of financial products and cross-transaction in financial sector become common. We also don't have providential regulation, which means if risk emerges somewhere, do we have countermeasures? These are key reasons why we now see financial risks rising across the economy," Huang told CGTN.

External economy: Not trade imbalance but globalization is the biggest worry
This year is full of uncertainties, with China-U.S. trade dispute still unresolved. Huang commented that trade tensions will not only have a major impact on the two countries but also have implications for the rest of the world.

"Certainly, there is a big issue now, the trade friction is happening between China and the U.S., and the biggest question is not about trade balance or policy issues, but about whether we should continue with globalization or we move in a separate way. That is the biggest issue, and it's important for the two countries," he noted.

China's Vice Premier Liu He will visit the U.S. on January 30 for consultations on bilateral economic and trade issues. Huang pointed out that the Chinese government is serious about negotiations with the United States.

"I hope the two sides are able to reach a partial agreement at least in the coming months. I am not sure if they will be finalizing negotiations next week, it may take longer. But for both sides, I think we are making progress," Huang added.


(From: CGTN website)