With a new government now in place, what are the prospects for financial reform in China, will interest rates become market-based, will the Renminbi become convertible, will banks begin to price capital economically? The talk explores these themes and discusses some of the obstacles to change that the new government faces.
At its core China's financial system is all about its banks. They are the provider of capital to all sectors of the Chinese economy, whether by outright loans or acting as both underwriter and principal investor in the country's growing bond markets. They operate now, as they have always operated, within the narrow framework of interest and currency rates set not by markets but by administrative fiat. For most of their history they have acted as simple conduits of capital based on an economic blueprint contained in a central plan. Some 15 years ago the entities then called specialized banks began to be restructured into what were meant to be commercial banks modeled after international, and particularly, US best practice. The outbreak of the global financial crisis not only called into question this ongoing effort, the massive economic stimulus had the effect of washing away the past decade long effort to transform what had been policy banks into more economically-oriented commercial banks.
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ABOUT THE SPEAKER
Dr. Carl Walter has contributed articles to publications including Caijing, the Wall Street Journal and the China Quarterly. He is also the co-author of Red Capitalism: The Fragile Financial Foundations of China's Extraordinary Rise (2012) and Privatizing China: Inside China's Stock Markets (2005).
Dr. Walter lived and worked in Beijing from 1991 to 2011, first as an investment banker involved in the earliest SOE restructurings and overseas public listings, then as chief operation officer of China's first joint venture investment bank, China International Capital Corporation. For ten years he was JPMorgan's China chief operating officer as well as chief executive officer of its China banking subsidiary.
Dr. Walter holds a PhD in political science from Stanford University, a certificate of advanced study from Peking University and a BA in Russian Studies from Princeton University.
