China faces global risk exposure, warn top economic thinkers
Top economic thinkers raise concerns over Beijing’s opening of the capital account amid growing instability in the world financial arena
A group of top economic thinkers are questioning the risks of opening up the mainland's capital account, saying the global financial arena has never been more unpredictable and that China's path to capital account liberalisation is far from clear.
"We are in completely uncharted territory," Andrew Sheng, a distinguished fellow at the Fung Global Institute and former chairman of the Hong Kong Securities and Futures Commission, yesterday said at the launch of the International Finance Forum's (IFF) first report on China's economy.
If China wants to plug into the global financial system, it needs to understand what kind of system it's plugging into
"If China wants to plug into the global financial system, it needs to understand what kind of system it's plugging into," Sheng said.
The uncharted territory Sheng pointed to was a landscape with soaring global leverage and record-low interest rates.
Since the onset of the global financial crisis in 2007, global debt has climbed by US$57 trillion to hit US$199 trillion at the end of last year, according to a report from McKinsey. Over that time period, the global debt to gross domestic product ratio jumped from 269 per cent to 286 per cent, financed by quantitative easing in the United States and interest rates falling to or below zero.
Opening China's capital account to the current build-up in global leverage held few advantages to China, Wang Tao, chief China economist at UBS, said at a roundtable discussion at the launch of the IFF report.
"The strategic opportunity has been lost," she said.