Faster reform for China ruled out by ADB director
Any hastening of China's economic reforms was ruled out yesterday by a senior mainland banker.
In a blunt address, Asian Development Bank (ADB) Chinese executive director Li Ruogo admitted delays to financial reforms were to blame for many of the country's problems, including the development of an underground financial market and economic distortions.
But trying to introduce changes in a short period should be rejected, he told a curtain-raising seminar before the opening of today's ADB annual governors' meeting.
Slow progress was the cost that may have to be paid for successful development during 'an inconceivably difficult economic transition period from a centrally planned to market-based economy.' Despite far-reaching changes to come, he said control of the financial sector would almost certainly stay.
'Not because we like it very much, but simply because it is still effective in maintaining financial stability,' he said.
He also set out some of the major challenges facing China's reforms, saying greater difficulties and suffering were to be expected before the benefits appeared.
The existing interest rate mechanism needed to be liberalised and a market interest mechanism installed. This, in turn, would require restructuring of state-owned enterprises.
'This is one of the most difficult sectors, if not the most, to be tackled in the reform process,' Mr Li said.
It raised concerns about social stability and required a change in lifestyle and thinking, he admitted.
Separating the old system of bank lending and widening commercial lending would be one of the major tasks, along with the inauguration of more banks.
But this also would be a challenge because it called for a change in management thinking as well as institutions.
'In other words, behavioral change,' Mr Li explained.
Although he rammed home the problems to be overcome, Mr Li also claimed that China's economic developments and reforms over the past 17 years had achieved success.
Every Chinese citizen had increased their financial assets from 40 yuan (about HK$37) to 3,000 yuan since 1979, which meant that total household deposits multiplied more than 60 times to three trillion yuan.