A top Beijing-based think tank has called for more efforts to prevent deteriorating U.S. relations and better preparedness against Washington’s plans to decouple with China.
A report by the China Finance 40 Forum (CF40) made suggestions about how to foil with attempts by Washington to financially decouple the U.S. and China. The CF40 is a leading think tank made up of senior Chinese regulators and financial experts, and it has existing ties with Wall Street and American think tanks.
An excerpt from the report published online said China must oppose and effectively manage U.S. sanctions while making contingency plans for even more extreme conditions.
Amongst the risks considered were the possibility of sanctions against Chinese entities. At the think tank’s media briefing earlier this week, former chairman of the China Securities Regulatory Commission (CSRC) – China’s top financial watchdog – Xiao Gang highlighted the risk of sanctions against mainland financial institutions and their executives.
Market Opening
In order to improve relations, the CF40 report suggested a more cooperative approach to manage bilateral difference such as attempts to appeal to U.S. investors by using China’s growth prospects.
«We’ll use higher-level financial opening up to counter the increasingly complicated international environment, and strive for mutual benefits,» the report said while simultaneously highlighting greater regulatory cooperation.
The research report was led by China’s leading heavyweights in the sector including former CSRC chairman Xiao; Cai Fang, vice-president of the Chinese Academy of Social Sciences who advised President Xi Jinping last week on the nation’s next five-year plan; and Wang Xin, head of the People’s Bank of China’s research unit.
Market Ownership?
Despite many efforts to promote Chinese markets such as the establishment of «Stock Connect» schemes to allow investors to buy Chinese securities through Hong Kong, foreign ownership remains very limited. Overseas investors currently hold less than 5 percent of the A-share market capitalization on Chinese exchanges; less than 4 percent of the domestic bond market; and less than 2 percent of the banking sector.
«Why is the [foreign] proportion [of Chinese securities ownership] not high? Is our infrastructure – such as the payments, settlement, regulation and legal system – suitable for a more international market? This is what we should consider,» according to an «SCMP» report citing Lu Lei, deputy head of the State Administration of Foreign Exchange (SAFE), at the briefing.
Lu's comments follow those made by the Hong Kong exchange chief Charles Li Xiaojia who, in contrast, expressed bullishness about the future of foreign ownership with projections for it to reach as high as 25 percent.
Cold War... Or Not?
Despite rising U.S.-China tensions, the latter state has recently demonstrated a less hawkish stance when dealing with the former despite ongoing media coverage throughout the year on the prospects of not only a technological but also financial decoupling.
«In the end, we are not in the Cold War era or the Soviet Union days,» said Wang Huiyao, president and founder of Center for China and Globalization, another top Chinese think tank, at a U.S.-China business forum hosted by «Forbes China» last week. «I don't think the U.S. and China can be totally decoupled, which is impossible, unthinkable. It has got to be intertwined.»
UBS estimates that tech decoupling alone could reduce annual growth in China by 0.5 percentage points in the coming years due to the need to build substitutes alongside restricted access to advanced technology and equipment abroad.
