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(Global Times) In celebrating the 70th anniversary of the People's Republic of China, 1.4 billion Chinese have found relief provided by the central government as it continues to steer the country in the right economic direction. The results were realized through the government's efforts in embracing opening-up and reform policies, implementing public welfare programs, partnering with as many countries as possible, and avoiding a zero-sum game with the US. |
Building walls to block the free flow of personnel, commodities and technologies across borders created backwardness around the world. In spite of protectionist pressure from the US, China's central authorities have opted to open the door wider to other economies. Beijing is aware that only unfettered trade will lead to greater wealth and peace.
Beijing has tried to de-escalate the 15-month-long trade war with Washington. China's government has moved to omit punitive tariffs on selected US-made products, in addition to increasing imports on US soybeans, pork, and other agricultural produce.
Now, the world is pinning with the hope that the two largest economies will resolve their trade spat and reach an agreement as soon as possible. It will be wise for the two economic giants to avert further confrontation, as a zero-sum game benefits neither side.
China has implemented a series of measures to shore up the economy, which is facing downturn pressure mainly due to the US-launched trade war. The purpose of the recent moves is to integrate the economy closer with the global system while attempting to make the world's second-largest economy grow and upgrade in quality.
First, the central bank cut the required reserve rate for all commercial banks by half a percentage point in September, which was expected to inject 900 billion yuan ($128 billion) to the monetary system and stimulate a slumping economy. At the same time, the central bank introduced the Loan Prime Rate (LPR) regime and moved to decrease the new benchmark lending rate piecemeal to soften borrowing costs for China businesses.
Central bank governor Yi Gang said the decision-makers have plenty of room to adjust financial policies to maintain economic growth while ruling out immediate reductions on major interest rates. Previously, tax and fee reductions in China had relieved businesses of up to 1 trillion yuan a year, significantly boosting the bottom-line for companies operating inside China.
Second, China's foreign exchange regulator announced last month it would abolish the investment quota restrictions for QFII and RQFII to accelerate financial reforms and opening-up. The measure aimed at attracting foreign investment in China's equities market will push the country to adapt faster to the global asset management industry, and at the same time facilitate foreign capital's entry into Chinese markets.
Investment demand of foreign investors in Chinese equities has been on the rise. Now, as China's stocks and bonds are included in major international indexes like MSCI, FTSE Russell, S&P Dow Jones, and Bloomberg Barclays - the country's financial weight will increase. By the end of June, foreign investors held 2 trillion yuan in Chinese bonds and 1.6 trillion yuan in stocks, according to the central bank.
In July, the Financial Stability and Development Committee (FSDC) under the State Council ruled that China will remove shareholding limits on foreign ownership of securities, insurance and fund management firms in 2020 - 12 months earlier than originally planned.
If gauged from a higher perspective, China's financial opening-up should be seen as part of the government's efforts to honor WTO commitments and a move that enables it to integrate more proactively and closer with global capital markets. As a result, China's pace is moving faster than expected. Allowing more foreign investment in the capital market, investors could also share in China's economic success.
Third, China's central government has always held a down-to-earth approach when taking care of the country's 1.4 billion people. Recently, the government decided to replenish elderly pension accounts by giving them close to the 10 percent of state-owned enterprises stock.
On September 25, two of China's largest state-owned commercial banks, Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China, moved 115-billion yuan in stocks to the national pension pool. Following a three-year lock-up time, the shares can be sold and cashed in.
The government is exerting all efforts to ensure wealth and prosperity derived from decades of economic growth for all Chinese citizens.