| Abstract: |
Since the 2011 FSAP, China’s impressive economic growth has continued, and it
is now undertaking a necessary but prolonged economic transformation. China is
transitioning from an economic model based on exports and investment to a more
sustainable one based on services and consumption. The financial system has
facilitated this high growth rate and the consequent sharp decline in poverty
rates. The sector now reaches most of the population, as evidenced in
financial inclusion measures, and permeates virtually all aspects of economic
activity. The economic transformation requires a fundamental change in the
role of the financial system. Historically its role was to channel China’s
high savings at low cost to strategic sectors. Looking ahead, the policy
objective for the financial sector should be to facilitate China’s economic
transformation to a more demand-driven system, in which markets play an
increasingly dominant role in resource allocation and where consequences of
risk-taking are well-understood and accepted. |