China's WTO membership has made its economy merge into the world economy in a very fast pace and this process has brought enormous benefits to China and Asian region. Given this, a successful reorganization is vital to sustain China's robust growth, said Takatoshi Kato, Deputy director of International Monetary Fund at 2004 Beijing International Financial Forum on May 19.

Mr.Kato noticed China's progress in pushing forward reform of financial sector, especially in banking supervision and disposing of non-performing loans (NPL). He mentioned the government support for China's two commercial banks as pioneers in the reform, Construction Bank of China (CBC) and Bank of China(BoC), including capital injection into the two banks in terms of forex and specific performance targets and guidelines set by their watchdog.

He stressed the significance of a "comprehensive complete reorganization plan" to fulfill the targets for CBC and BoC. Such plans, he pointed out, should be worked out for other banking institutions to facilitate a sweeping reorganization in the whole banking sector. He strongly advised a system of responsibility be in place.

Mr. Kato also highlights the way for banks to build amodern corporate governance. Foreign strategic investors can play a very active role in this aspect, he said. He thought there should be no government intervention or loan rates limits. All of these, he said, showed the importance of strengthening supervision.

He illustrated the experience of other countries in achieving efficient monetary policy, which is particularly crucial for China now as its economy is facing the pressure of overheating and a looming risk of new NPL due to the soaring credit. Asia has learned from the Financial Crisis in 1997 and 1998 how risky it would be for a country to open its capital account too early. Some countries, such as Britain, Japan and most European nations, had a flexible exchange rates system long before they lifted capital control.

By People's Daily Online