China's financial reform experiments

Premier Li Keqiang focuses on financial reforms.

On the 2nd December Premier Li Keqiang meets with Chinese economists to discuss policy reform. [Photo/China News Service]

On the 2nd December Premier Li Keqiang meets with Chinese economists to discuss policy reform. [Photo/China News Service]

On the 2nd December, Chinese Premier Li Keqiang hosted a forum of economic experts where he emphasized that supply-side structural reforms, particularly those relating to financial support, were the key to promoting innovation and unlocking sustainable economic development. 

5 pilot financial reform projects

Two days later, on the 4th December, the State Council held its weekly policy briefing with several senior members of the People's Bank of China (PBOC) in which they discussed their pilot projects in financial reform. The projects are part of a larger framework of economic policy experimentation aimed at developing the three main types of economic region in China:

  1. Developed eastern and coastal regions.
  2. Central regions undergoing industrial transformation.
  3. Under-developed western and ethnic border regions.
4th December State Council weekly policy briefing.[Photo/Xinhua]

4th December State Council weekly policy briefing.[Photo/Xinhua]

First, in Jilin province, northern China, agricultural reforms include cooperative finance schemes, house property mortgage loans, the development of internet services to promote ecommerce, the introduction of agricultural insurance and perhaps most notably 'land benefit guarantee loans' which involve agriculture-related asset securitization opening the way for financing via capital markets.

Second in Taizhou, a city in Zhejiang province which lies on the east coast of China just south of Shanghai, PBOC has conducted a pilot project for small/micro businesses. Reforms include improving direct financing channels, promoting a social credit system in local areas, enhancing cross strait financial exchanges, developing insurance schemes and improving financial regulation and risk prevention.

Finally, free-trade zones (FTZ), like the one successfully introduced in Shanghai, have been proposed in Guangdong (near Hong Kong), Tianjin (near Beijing) and Fujian (near Taiwan). The aim is  to increase cross-border use of RMB by creating the systems and regulatory environment that would allow institutions in these FTZs to take on foreign debt.

Future possible financial pilot projects include programs around technology finance, inclusive finance and green finance.