The ongoing global financial crisis, which has its origins in
the U.S. subprime debt collapse of 2008, has plunged the whole
world into a deep and continuing recession.
However, in spite of the extreme economic damage the crisis has
caused, it has also left something positive; it serves as a lesson
to policymakers who can now work out preventive measures to guard
against future disasters.
As its economy has been stable throughout the crisis, China is
in a prime position to learn from the mistakes that triggered the
longest economic slowdown since the Great Depression. At the most
recent national financial work conference held in Beijing on
January 6-7, the Chinese Government said it would ensure that more
capital was channeled into the country's brick-and-mortar economy.
This move largely stems from lessons learned from the current
financial crisis in the Western world, where the development of the
virtual financial economy in the early 2000s became unbridled.
Inflated returns, legal loopholes and extremely complex financial
products meant the financial sector was beyond effective management
The decision to channel financial resources into the real
economy will mitigate the risk of China suffering a Western-style
financial crisis and also serve the needs of China's own economy.
For instance, as China moves into a more mature phase of
development, small and medium-sized businesses across the country
are in desperate need of cash, which they need to expand and grow.
However, Chinese banks have traditionally been reluctant to lend to
smaller businesses, lending instead to large state-owned
enterprises. Moves to increase capital flows into smaller business
will be conducive to achieving more balanced economic growth and
Maintaining a sound and risk-free financial sector is also a
crucial part of ensuring sustainable economic growth. The just
concluded national financial work conference, the fourth of its
kind since 1997, has set the tone for the country's financial
development in the coming five years. The previous conferences have
helped China ward off the Asian financial crisis, deepen reforms to
comply with its WTO commitments, and also helped the financial
sector forge a modern banking system. Judging from the previous
meetings' success, we have reason to hope the guidelines and
policies set down at the latest conference will help lead the
nation's financial sector in a more sustainable direction.