Manage market openness at a Chinese pace

• Source: Global Times
• [02:43 March 30 2010]
• Comments

Should China open its market to Western financial institutions the way it has opened its market to five-star hotels, as some Western officials have suggested in talks with China, the potential risks brought to China and the world would be huge.

The reason is simple: Free trade doors cannot swing open too fast, and market openness should be managed at the right pace, as China has done for the past three decades.

China's opening-up has come to a critical juncture now. While it faces intense challenges at home to build domestic demand and boost employment, the external pressures are mounting from those who wish to enjoy the unlimited benefits of a fully open, vast Chinese market.

The sector with perhaps the most at stake is the financial market.

The eagerness of Western companies to tap into the $723 billion payment-processing market can be seen in the recent call for action by three Western credit card companies.

Their call for more access to the Chinese market is quite understandable.

It is largely not a conspiracy to pry the market open and exploit profits from fledgling Chinese consumers, as some may assume.

It is more a product of realistic deliberation. Given China's rising economic clout and the lackluster recovery of Western countries, Western companies are justifiably building up their expectations for the booming Chinese market.

What is often missing from their expectations, however, is a serious consideration of China's past, present and future.

Take the financial market. True, the competitive advantages enjoyed by Western financial products and services have a big chance of helping Western economies spring back with more "green shoots." If the Chinese market is cracked open and great demand growth is spurred accordingly, it would be a perfect solution to the thorny problems of trade deficit and high unemployment in Western nations.

But there are realities in China's financial market that should not be ignored.

Thanks to the gradual and cautious approach taken in financial reform and opening-up since the early 1990s, more market competition and liberalization have been encouraged, and bad loans have been effectively curbed. China was less hard hit and rebounded faster than other countries after Lehman Brothers' collapse as a result.

Finance is a form of the virtual economy, and its healthy growth stems from the steady development of the real economy.

As the challenges confronting China's real economy are no less severe after the financial crisis, the same rule of gradualism should still apply.

While China carries on its commitment to the WTO and keeps its door open to foreign business, it will always manage its market openness at a pace that is consistent with its domestic economic conditions.

That rational approach is in the interest of China itself, and of the world at large.