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C3S Event Report- Financial Reforms in China: Problems and Prospects

C3S Report No: 009/2017

The following is an event report of a C3S lecture-discussion held on April 18, 2017.

The Chennai Centre for China Studies conducted a lecture-discussion held on April 18, 2017 at C3S, Athena Infonomics Building, Chennai. Dr. Jacob Kurien, Resident Professor of International Economics Johns Hopkins University Nanjing University Centre, China, spoke on ‘Financial Reforms in China’.

The event started off with the welcome address delivered by Ms. Asma Masood, Research Officer, C3S, who went on to introduce the speaker.

Dr. Kurien obtained his M.Phil. and Ph.D. degrees from Madras University, India. Before joining the Hopkins-Nanjing Center for Chinese and American Studies in September 2011, he was a Visiting Associate Professor of Economics at Rockhurst University, Kansas City, USA. Prior to moving to the U.S., he was Associate Professor and Vice-Principal of Loyola College, Madras. Dr. Kurien was also a Visiting Scholar at the Universite Africaine De Technologie, Benin, West Africa and the Xavier Institute of Management (XLRI), India. He was awarded the U.S. Fulbright Fellowship to Sri Lanka and taught at Peradeniya University (2009-2010). Dr. Kurien has delivered guest lectures at La Trobe University, NSW, Australia and Chulalongkon University, Bangkok.

Commodore R.S. Vasan, Director, C3S, extended a warm welcome to the speaker, moderator Mr. K. Subramanian, former Joint Secretary (Retd.) Ministry of Finance, and the audience.

The moderator for the day Mr. K. Subramanian, went on to introduce the audience to the existing financial conditions in China and gave a brief overview of the banking system, its performance over the years and the important role it plays as the ‘engine of growth’.

The speaker started off his presentation with quotes by famous economists, who had succinctly articulated China’s objectives and ideology of growth. The speaker using this brought out the quality of gradualism as exhibited by the Chinese economy i.e., their belief in slow but steady and sure progress. The presentation compared the Chinese banking system to that of the global economy and established their superiority in terms of asset holdings and extension of credit. Among the world’s largest banks the Chinese banks are the top three, holding assets of value between $2.5-3.5 trillion.

The financial reforms started in 1980 and with it there has been a steady growth in the savings rate and the investment rate which has been reflected in their exceptionally high growth rates that has been maintained steadily for over 34 years now.  The speaker also mentioned that the Chinese are very intent on maintaining internal stability and also concentrate on the domestic growth of the financial system. One of the rising problems addressed by the presentation was the misrepresentation of the NPLs (Non-Performing Loans) and the rising threat presented by them.

This presentation was followed by a Q and A session where the finer details about the rising nominal income and its negative impact on purchasing power at a time when China’s objective is to improve expenditure on consumer goods were discussed. A link was also established to the banking sector with respect to the policies of credit availability and credit control measures. The influence of shadow banking in all of this was also discussed. A bigger picture was established by analysing the financial sectors position vis-à-vis the backlash of Trump’s inward looking, insular policies, the Communist party of China’s (CPC) extent of interest in the reforms and the effects of not having a minimum of foreign exchange reserve. The question and answer session gave a complete and a comprehensive picture of the existing financial conditions in China.

The session was summed up by Mr. K. Subramanian. He portrayed the existing conditions in China and commended them for taking the initiative to come up with a system to suit their nation better, instead of copying the western system much like India after 1991. The event was concluded with the presentation of the vote of thanks by Commodore R.S. Vasan.

(Compiled by Nappinnai Dhamodharan, Intern, C3S. Nappinnai is a 2nd year B.A Economics student at Stella Maris College, Chennai.)

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