ABSTRACT
National-levelfinancialpolicy-makingisusuallyhighlyconcentratedandsecretive,foritconcernsacountry’seconomicsecurityandrequiresspecialisedknowledge. Central banks, treasuries and international institutions are known to use their technological advantage to insulate themselves from external pressure in order to attain autonomy in policy-making. China has traditionally prioritised control and stability over flexibility in its financial policy, as evidenced by its managedexchangerate,closedcapitalaccountandfixedinterestrates.Inrecent years,however,therehavebeensignsthatcontrolisbeingrelaxedtoallowmore flexibility and openness in the financial system.China has officially ended the RMB’spegtotheUSdollar,takeninitialstepstowardsinternationalisingthecurrency,launchedlocalexperimentsoffinancialliberalisationandcarriedoutinitial stepsof interest rate liberalisation.Were these reforms the resultsofanational strategy based on consensus among policy-makers, were they imposed by an authoritarianleadershiponfragmentedinterests,orweretheytheresultsofbattles andcompromisesbetweendifferentcampsinafragmentedauthoritarianregime? TowhatextentisChina’scurrentfinancialpolicy-makingfragmentedorauthoritarian?WhichfactorsdeterminethefutureprogressofChina’sfinancialreform? Thischaptermaintainsthattherecentstepsoffinancialreformarethepartial success of reformists, supported by domestic and international pressures or crises,China’schangingeconomicneedsandinterventionbytheleadership.The consensusonthenecessityoffinancialreformhasbeenreachedonthesurface, but differences remain regarding the specific steps and pace of reform. The extent to which financial reform remains a rhetorical commitment or can be steadily carried out depends on how strong and reformist the leadership is. Withoutinstitutionalguarantees,theprogressofreformwillstillbeentangledin political battles between reformists and conservatives in a fragmented policy- makingandimplementationstructure. Thischapterwillfirstprovideabriefintroductiontotheformalpolicy-making institutions in China and then draw a map of the conservative and reformist actors.Themainbodyof thechapterwill analyse thepoliticsof four areasof financialreform,namelyexchangeratereform,RMBinternationalisation,local
experiments inShanghaiand interest rate reform.Basedon the fourcases, the concluding remarks discuss the determinants of the progressmade inChina’s financial reform and, for analytical purposes, suggest laying emphasis on the detailsandpoliticalfoundationofconsensusreachedunderauthoritarianismina fragmentedstructure.
