(Yicai Global) March 29 -- China's economic reform poses no deep adverse effects for the market, according to the former governor of the People's Bank of China.
Financial opening up is good for competition and will not substantially harm the market nor financial institutions, Zhou Xiaochuan, who is also the vice chairman of the Boao Forum for Asia, told Yicai Global today at the political conference.
China's financial institutions have gained a firm foothold in many respects, Zhou said. China started to reform its financial sector very early but the opening-up is not enough and it will be deepened, he added.
Foreign institutions are willing to expand their businesses in China, especially in terms of corporate bond underwriting, as China's bond market is becoming more accessible, he added.
The future will hold a regulated floating exchange rate system for the Chinese yuan, which will allocate resources to the market and facilitate an economic balance, Zhou said. The exchange rate has become more market-oriented and internationally recognized after surviving the Asian and global financial crises, and the redback has a larger floating range that reflects the supply and demand, according to Zhou.
China is a vital part of the global economy as it is the world's largest trading country and an important investor, and with an effective exchange rate mechanism, it can have a better role in the global economy, including the financial systems of the Belt and Road nations, according to Zhou.
The former chief of the central bank also talked about the reform of the World Trade Organization. Zhou has discussed with think tanks, particularly European ones, about how to upgrade the international trade body. The participants have agreed on some aspects, but other parts they disagree on, so no final plan has been crafted.
The WTO could have two different futures, according to Zhou. The first one is that most WTO member countries agree on a reform plan that will be adjusted to gain everyone's favor. However, if WTO members cannot reach a consensus, each region needs to negotiate their own free trade agreements. In this case, these regions must prepare backup plans if these deals do not deliver as expected.
Editor: Emmi Laine