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- China needs to change way it finances economy - think tank
China needs to change way it finances economy - think tank
China needs to develop a better system for financing small businesses that drive innovation in the economy but currently struggle to access the funds they need for growth, a leading Chinese think-tank said in a report published Sunday.
China’s economic development over the past 40 years has taken place through a financial system that has high government intervention and is “absolutely dominated by banks”, the China Finance 40 Forum said in an annual report.
Such a model, however, tends to distort financial resources in favor of large companies, the report said. That comes at the expense of smaller firms, which are the main drivers of innovation in the economy but usually lack the necessary assets for collateral or government guarantees to secure finance for growth. Financial regulators have also failed to prevent certain financial risks, the report said.
The current financial system “is clearly not well suited to the core task of current high-quality economic development. Therefore, an important task of financial reform should be to adjust the financial structure,” the report said.
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