China lays out contrasting vision for financial system, rejects ‘predatory’ Western outlook

In official publications and a broad regulatory overhaul, China has indicated scepticism of the Western approach to finance

Distaste for ‘monopolistic, predatory and vulnerable’ industry appears to be motive for strengthened oversight and Communist Party control

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President Xi Jinping visits the Shanghai Futures Exchange. Recent policy shifts have seen a greater emphasis on control and risk prevention for the financial industry in China. Photo: Xinhua

Published: 8:00pm, 6 Dec 2023Updated: 9:59pm, 6 Dec 2023

After years spent emulating some Western practices in the construction of its financial system, China has begun to turn its back on an ideology recent articles have deemed an unacceptable source of risk and inequality – a change in perspective likely to have been a factor in this year’s regulatory overhaul.

The choice by official publications to highlight ideological cleavages and domestic policy goals indicate a different development path is planned for China’s finance industry compared to the United States or Europe.

Under the capitalist ideology and social system, finance capital reveals its monopolistic, predatory and vulnerable nature

Central Financial Commission

In an article published Friday in the Communist Party’s theoretical journal Qiushi, the newly formed Central Financial Commission declared China has “fully learned the lessons of Western financial development” and has answered “many major theoretical and practical issues that Western financial theory has never been able to solve”.

The commission also had strong words for the consequences it found that theory has wrought. “Under the capitalist ideology and social system, finance capital reveals its monopolistic, predatory and vulnerable nature,” it said. “It not only creates a huge gap between rich and poor, but also triggers recurring economic and financial crises.”

To control those perceived risks, enhancing the party’s leadership was top of the agenda at the twice-a-decade central financial work conference, held at the end of October.

“It is to be understood that the operations of Chinese financial institutions, under the guidance of the [Communist Party], are driven by a different imperative compared to their Western counterparts,” said Wang Zichen and Jia Yuxuan, researchers with the Beijing-based Centre for China and Globalisation think tank.

In the Western context, profitability, maximising returns for shareholders and adhering to regulatory requirements, is the primary objective of financial institutions, they said in a note last month. In contrast, they added, Chinese institutions hold as their prime directive the faithful execution of tasks assigned by the party.