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Financial Reform in China

Deeper structural changes are needed to reform China’s financial system, explains Adam Hersh.

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idea light bulbLast year, China’s political leaders set forth an ambitious and unfolding agenda for financial reform as part of a broader national economic strategy of structural rebalancing toward more domestic demand and innovation, as well as a more environmentally friendly and more equitable economy.

These goals are not new for China but rather have persisted across decades of China’s five-year plans. What is new is China’s political leadership, and new leaders have offered a sweeping vision that sets an ambitious agenda to advance the next wave of reform in China’s long evolution from a centrally planned economy that began in 1978. In the November 2013 18th Party Congress Third Plenum Decision— which is at once both a governing policy document and a political statement similar to the State of the Union address—the party’s Central Committee called for reforms across virtually all aspects of society and pledged that the economy should embrace “a decisive role for the market.” Nearly one year later, the scope and intention of these reforms are starting to come into focus.

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