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CHINA could learn lessons from the recent global financial turmoil and continue to push ahead with financial reforms to cushion such crisis, US Treasury Undersecretary David McCormick said yesterday in Shanghai.
"A well-developed financial sector is essential to channeling capital to businesses that will power future growth," McCormick, the undersecretary for international affairs, said in a speech at the Lujiazui Forum. "As China's economy becomes more complex, so too will its need for financial services."
McCormick suggested China increase access to direct financing, develop a yield curve for government bonds, introduce a variety of financial products and foster the growth of institutional investors.
''There are risks, to be sure, in carrying out these reforms,'' said McCormick. But ''there will be significant costs if China slows the development and reform of its financial sector.''
The undersecretary noted that a more developed financial sector will help reduce the need for very high saving rates. ''A greater diversity of financial instruments for saving, risk diversification and consumer borrowing would relieve some of the need for precautionary savings,'' he said.
The modernization of the financial industry will also enhance the efficiency of capital allocation and dampen the volatility of investment cycles, he said.
McCormick also called for policies to support more foreign participation in China's financial industry, saying such move can expand the depth of opportunities for Chinese and foreign players.
''Increased foreign participation in the financial sector will expedite the development of world class financial sector talent within China,'' benefiting financial centers like Shanghai, McCormick said.
The US official is in China meeting business leaders and government officials ahead of the fourth Sino-US Strategic Economic Dialogue that is expected to be held in Washington in June.
The SED will focus on cooperation in financial services and looking for ways to increase the flow of capital between the two countries as well as energy and environment, McCormick said.
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