Yi Gang, People’s Bank of China said that the Chinese financial markets do not offer much access to the rest of the world. According to Yi, the foreign financial services organizations need to be treated the same as domestic institutions in terms of scope of business, shareholding proportions, and licenses and so on. While speaking at the forum on Sunday in Beijing, he said that the central bank would be focusing on offering more hedging tools during this year in order to allow investors to manage risks better.
Officials have placed pledges during the China Development Forum to open up the economy to foreign companies and make sure that the playing field remains in level with domestic firms. The Chinese government is also looking to bring in foreign capital and expertise during a time of economic slowdown, concerns regarding long term financial stability as well as high debt levels.
Yi also said that it is necessary to better the financial risk prevention mechanism along with the financial opening up to foreign firms. Although welcoming foreign firms isn’t the origin of financial risks, it will probably increase the complexity of risk control. Yi has also promised to make it easier for people to hedge their money in the markets. This had been one of the main requests from foreign investors and companies.
According to Yi, it is essential to study how to determine prices more accurately using the capital markets. He also said that it is important to offer different hedging tools to allow all kinds of investors to manage risks more effectively. He also mentioned that increasing the number of financial instruments available allows people to optimize asset allocation.
Currently, the Chinese currency is one of the topics in the trade talks taking place between the U.S. and China. The Trump administration is worried about how the potential devaluation of Beijing will blunt the tariff’s impacts. Flexible currency exchange will be a complementary step in helping China open up its market and absorb risks better. Earlier top officials have promised that they will not be manipulating yuan to get a trade advantage.
Yi also said that the central bank has withdrawn from daily interventions and will allow the market participants to get used to a more flexible exchange rate. Top officials have also pledged to expedite debt sales and lower tariffs in 2019 as they try to manage the slowing down of the Chinese economy.
