China needs to revitalize the real economy and free up capital forsmall businesses

China is in the initial phase of a state-led financial reform,starting with its private economy powerhouse of Wenzhou in ZhejiangProvince, in an effort to better support the development of thereal economy. On March 28, the State Council gave the word to establish a pilotzone for comprehensive financial reform in Wenzhou. The planrequires the city government set up a financial mechanismfacilitating the locality’s social and economic development. Italso outlines 12 tasks for Wenzhou to focus on during the reformprocess, such as “encouraging and supporting participation ofprivate capital in the reform of local financial institutions.” In April, Shenzhen, the original base of China’s economic reform inthe late 1970s, followed suit with a guideline for financialreform. CCTV Box Cameras

The focus of Shenzhen’s financial reform will be to servethe development of the real economy, including the introduction ofpilot two-way trans-border loans between the mainland and HongKong, the establishment of the Shenzhen Qianhai Equity Exchangebefore the end of this year, and the development of the innovationbond market. Up to now, 16 pilot zones have been set up to connect technologyand finance in cities like Tianjin and Chengdu, and they areseeking further financial innovation to offer financial support toscientific and technological enterprises. Guo Yanhong, researcher at the Research Institute of HuachuangSecurities Co. Ltd., said economic readjustment is generallyaccompanied with opportunities for institutional improvement. InChina, the recent slowdown of economic growth and the intermittentbreakout and intensification of liquidity risks all substantiatethe need for financial reform. Dome Infrared Camera Manufacturer

According to Guo, the old economic mechanism will face a series ofchallenges. To avoid economic recession, it is necessary to adoptmeasures to prevent the economy from shrinking. Historically, aftereconomic crises, corresponding institutional innovations havetypically followed. “Through analysis of U.S. financial reforms, we can find that thereforms actually represented a process of financialliberalization,” said Guo. HD-SDI Camera

The pilot financial reforms in Wenzhou and Shenzhen also aim atpushing forward the Chinese financial mechanism. Wenzhou’s reformwill regulate private capital, while reform in Shenzhen will serveeconomic transformation and focus on incorporating capital fromdiversified channels into the process. Ending state monopoly Days after the State Council executive meeting on March 28, PremierWen Jiabao announced that the Central Government was determined tobreak the monopoly in the banking sector during a visit to FujianProvince. “I think it has been too easy for our banks to make profits,” hesaid.

“The reason is that a small number of large banks hold amonopoly in the sector. This is why we’ve now come to make way forprivate capital to enter the financial service sector, whichultimately requires breaking monopolies.”.

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