China Finance 40 Forum (CF40) Profile picture
Aug 2, 2020 9 tweets 2 min read Read on X
#Digitalization represents the trend of future development of the #capitalmarket, but #China’s capital market still faces many challenges in its digitalization, according to Xiao Gang, former CSRC Chairman:
new.cf40.org.cn/uploads/202007… 1/9
1. The challenge of global competition. Compared with their counterparts in developed countries, securities firms and fund managers in China fall short in IT investment...2/9
2. The integration of the capital market and digital currencies will confront difficulties. Many countries are working to introduce digital fiat currencies, but how could the new currencies accommodate the capital market? What fundamental changes will they bring about? 3/9
3.1. Increasing echnology-finance integration - technology firms have ventured into capital market and financial services, while financial institutions are seeking digitalization, some of them even hoping to transform into technological firms...4/9
3.2. As a result, the two types of institutions are increasingly integrated with each other with rising competition between them, which has posed new challenges to the development of the capital market and financial risk management...5/9
4. Regulation needs to be upgraded. Amid the boom of digital economy and finance, especially the digital capital market, regulators find themselves in a new situation different from the traditional market environment that requires new regulatory frameworks, means and tools...6/9
5. Consumer and investor protection. The boundaries between some financial products and services are increasingly blurred as digital finance and digital capital market develop. Legislation has failed to keep up with the change, making investor & consumer protection harder...7/9
6.1. Organizational transformation. Digitalization will breed new types of organizations and institutions such as virtual exchanges. Besides, digitalization of financial institutions will bring about organizational change...8/9
6.2. Securities firms, fund managers and futures brokers will have to transform their traditional product- and account-based business models and organizational structures to new, customer-oriented ones. 9/9

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More from @ChinaFinance40

Feb 22, 2023
According to CF40’s latest macroeconomic quarterly report ‘China's Countercyclical Fiscal Policy and Sustainability of Government Debt’, China has never heavily relied on budgetary spending to provide counter-cyclical stimulus. 1/5
Instead, it mainly adopts a model where local governments, financial institutions and local government financing vehicles work together to boost investment. 2/5
Statistics show that such a model has helped China stabilize its economic growth, but also increased the broad government debt to GDP ratio, raising concerns about the sustainability of government debt. 3/5
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Feb 22, 2023
China could consider implementing negative individual income tax (IIT) to boost consumption and employment, advises CF40 research department. 1/4
It means that the government provides taxpayers with a certain amount of subsidy when the level of working income is lower than a given threshold. 2/4
A CF40 policy brief proposes a two-pronged policy scheme consisting of rewards and subsidies for businesses adding new jobs on one hand, and negative IIT on the other hand, which could drive spending and employment without causing excessive fiscal expenditure burdens. 3/4
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Feb 21, 2023
The PBC's "benign neglect," an indirect policy tool devised in 2022 to influence the value of the RMB, was quite successful. It allows the market to determine the exchange rate while retaining capital controls as a last resort.1/5
It should be the most effective currency strategy for China's central bank, said CF40 Advisor Yu Yongding in a recent seminar.2/5
China should maintain a floating exchange rate regime to bring out its role as an automatic stabilizer while maintaining necessary capital control as a last resort.3/5
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Feb 17, 2023
Despite the shrinking working-age population, there is a tremendous pool of surplus rural labor in China., said Caifang, Chief Expert of National Think Tank of Chinese Academy of Social Sciences. 1/5
Many analysts predict that China will not have a rapid growth rate in the future or emerge as the largest economy in the world because its working-age population and total labor have stopped growing. 2/5
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Feb 16, 2023
#China could consider implementing negative individual income tax (IIT) to boost consumption and employment, suggests CF40 Research Department in a 2022 policy brief ‘Negative Individual Income Tax: Some Thoughts on Policies to Drive Employment and Consumption’. 1/4
It means that the government provides taxpayers with a certain amount of subsidy when the level of working income is lower than a given threshold. 2/4
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Feb 3, 2023
Given China’s macroeconomic environment in December 2022, the following policies should be taken to boost China’s economic growth and deal with potential risks, said ZHANG Bin, CF40 Nonresident Senior Fellow: 1/5
1. Lower interest rate by 25 bps each time until the employment and growth targets are hit.
2. Issue new types of fiscally subsidized bonds and policy loans to support investment in public goods and quasi-public goods infrastructure projects that feature limited returns.2/4
3. Set up special funds to help market entities battered during the pandemic get back on their feet; increase the amount of living allowance for low-income groups. 3/5
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