By Henry Paulson Jr. and Robert E. Rubin

The efficiency of China’s economy would likewise improve if the country reformed its financial sector, encouraging competition (and empowering Chinese consumers) by granting more private banking licenses, liberalizing interest rates on deposits, and ending preferential access to credit for state-owned firms. Those subsidies create an overabundance of cheap money that many Chinese companies depend upon. Mispriced capital impedes the evolution of China’s economy, prevents the efficient use of capital, and financially constrains some of the economy’s best performers—private companies, which are already responsible for more than 70 percent of Chinese jobs.  Read more…