How will market access create jobs on Main Street?
Fair and competitive access to China’s fast-growing middle class and business sector represents an unprecedented commercial opportunity for U.S. manufacturers, large and small, as well as farmers and services providers. This means economic growth and job creation in the U.S.
China desperately needs a more open, competitive and effective financial system. Despite recent improvements, credit analysis, loan pricing, risk management, internal controls and corporate governance practices in China’s banks remain inadequate to meet the demand for growth. And, China’s equity and bond markets are among the smallest and least developed in the world.
A more open and effective financial system in China is the key to resolving two of the major issues that have complicated the global economy’s most important bilateral relationship between the United States and China.
Greater currency flexibility through a market-determined exchange rate is possible with the expertise provided by U.S. and foreign financial services firms. A rapid shift to a market-determined yuan is not possible given the underdeveloped state of China’s capital markets. China’s banks, securities firms and other businesses lack the expertise to develop and trade derivatives and other structured instruments used to hedge the risk associated with greater currency volatility. Sophisticated derivative products and hedging techniques provided by U.S. and foreign institutions would diminish such concerns.
Reducing the trade deficit requires the activation of China’s 1.3 billion consumers. Chinese households historically save a comparatively large portion of their income. Reorienting the financial habits of China’s population to a better balance between savings and consumption requires the availability of financial products and services – personal loans, credit cards, mortgages, pensions, insurance products, and insurance intermediary services.
The fastest way for China to acquire the modern financial system it needs to continue growing is to import it, by opening its financial sector to participation by U.S. and foreign financial services firms. Emerging businesses in China need to save, invest, insure against risk, create and protect wealth and consume at higher levels. Opening China to U.S. financial institutions would help China meet its goals and give U.S. manufacturers and service providers access to a vast new market.