Is China taking financial liberalisation seriously?

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At the ECMI-CEPS event organised on September 25th, the discussants emphasized that China is currently facing formidable challenges with regard to the timing, speed and sequencing of the reforms. The financial sector reform alone would not be enough. It has to be embedded in wider process aiming at addressing distortions in many other important areas of the Chinese economy.

On the financial reform agenda, it has been considered unwise to start implementing Basel III, liberalise the deposit rate, cut the roll-overs of NPLs, liberalise capital account, i.e. have all these measures becoming effective at the same time, because the banks are not yet in shape and the medium-term profitability of the banking sector looks gloomy. Also, it appears that Chinese investors are interested in smaller, specialised, niche investments. However, there are still many entry barriers in China for the widely recognised European UCITS.