Over the past few years, China has made remarkable progress in promoting high-standard financial opening-up, with a total of 1,110 foreign institutions already entering the local bond market. However, there is still a long way to go before the Chinese financial market realizes a highly efficient allocation of global financial resources. The country needs to make further efforts in deepening reforms, improving the system, optimizing policies and promoting their implementation.

Challenges

Currently, China is facing several new challenges in further opening up its financial market.

A trend of anti-globalization is on the rise and some Western countries are hyping the "China threat "theory. In the name of "de-risking", they encourage foreign firms to exit the Chinese market. As a result, some financial institutions that mainly serve multinational corporations are shifting their business focus overseas as well, along with the shift in both industrial and supply chains.

Some developed economies have also imposed restrictions on investment in China, and excluded Chinese enterprises from some well-known global and regional benchmark indices for stocks and bonds, thus gradually "decoupling "from China's financial sector.

In addition, China has encountered some temporary difficulties in its economic recovery after the COVID-19 pandemic, as well as in economic transformation and upgrading, which has fomented some doubt in foreign investors' minds. They had grown accustomed to the long-term rapid growth of the Chinese economy, and thus the temporary slowdown can greatly affect their willingness to invest.

Suggestions

To address these challenges and further promote financial opening-up, China needs to make continuous efforts in the following five respects.

First, China should promote further opening-up in more financial subsectors, including technology finance, green finance, inclusive finance, pension finance and digital finance.

Currently, the country expects to make better use of credit, equity and debt to support innovation in the science and technology sector. In the meantime, in some developed foreign markets, a variety of financial institutions with extensive experience in this area can provide the products China needs.

China is also actively seeking international cooperation in green finance, which has contributed to relevant product development, rule-making, as well as investing and financing activities. Having issued the largest amount of green bonds in the world, China remains quite attractive to international investors for this reason.

Promoting pension finance can be an effective way for China to cope with its rapidly aging population. With help from foreign investors, the country can better make plans for, and invest in, pension finance, as well as improve the pension insurance system.

The digital finance sector has seen fast growth in recent years. Countries rely on it to provide more financial services, forestall and control risks, and improve the efficiency of management and customer service. Moreover, cross-border financial data flows have now become a new focus for the setting of rules, cooperation and governance in financial markets worldwide. China must facilitate such flows while safeguarding the security of data transmission. It needs to classify all financial data and set standards to manage cross-border data flows accordingly.

Second, the country should attract and retain more foreign financial institutions, further enriching the modern financial system. Although the country has already formulated a number of policies to support foreign institutions operating or investing in China, there still exist some problems in said policies' actual implementation, such as the fragmentation of day-to-day regulation.

While unifying the management standards of local and foreign institutions to meet common needs, China should not forget to create sufficient conditions for foreign investors to leverage their special advantages. It needs to optimize relevant policies and provide more convenience for foreign firms based on their business expertise and overall strengths, making sure there is greater scope for them to grow.

Third, China must build a fully functional local financial market with comprehensive rules, reasonable structure and strong regulations. It should compare local financial market rules with those of advanced markets, so as to stay aligned with internationally recognized standards, effective rules and best practices. With China gradually improving the certainty, transparency and predictability of its policies, foreign investors will have more confidence in the country's financial sector.

China also needs to develop high-quality investment products for the world by deepening reforms, strengthening supervision and improving corporate governance, as well as better protecting investors by balancing the interests of both supply and demand sides, and severely punishing violators of existing laws.

Fourth, China should provide more convenience for cross-border trade activities, as well as investment and financing. At present, foreigners who come to China to engage in business, tourism and short-term exchanges still have a number of difficulties in obtaining basic financial services.

For example, China's mobile payment penetration has reached 86 percent, ranking first in the world. While Chinese people can use mobile phones to make payments on almost all occasions, foreigners are less accustomed to such practices. China needs to connect its convenient mobile payment system with traditional payment methods such as credit cards, thus seeking common ground between payment systems at home and abroad.

In addition, Western countries are shifting industrial and supply chains to Southeast Asia, which is China's near neighbor and a region actively engaged in the Belt and Road Initiative. China should actively carry out monetary and financial cooperation with the region to facilitate cross-border business by all varieties of entities.

Fifth, China should do its utmost to safeguard economic and financial security in the process of opening-up. It needs to fill in the gaps in financial regulation and further improve the precision and effectiveness of regulations. In addition, to manage financial risks, China must establish a more effective system, enrich the toolbox and make necessary preparations.

Promoting international cooperation is also an effective way to achieve financial security. After the outbreak of the 2008 financial crisis, major countries learned the lessons and cooperated to strengthen regulation of all banks. Today, the world needs to strengthen policy coordination in economics and finance, and jointly respond to developmental challenges, thus building a resilient international economy and a financial safety net.

The writer is former deputy governor of the People's Bank of China, the country's central bank, and former chairman of the Export-Import Bank of China.

The article is a translation of key parts of her speech to the 2023 annual conference of the China Wealth Management 50 Forum, a think tank.

The views do not necessarily reflect those of China Daily.