How is China's financial environment among its 50 major cities?

Governor of People's Bank of China Zhou Xiaochuan has vividly compared financial environment with ecological environment in major Chinese cities. Financial ecological environment refers to economic and legal systems, social credibility and cultural environment in a city. According to a report on financial ecological environment assessment among major Chinese cities compiled recently by Chinese Academy of Social Sciences, Shanghai has ranked the first among the top 50 cities in China in its financial environment.

By the end of March 2006, total capital assets in foreign banks in Shanghai reached 50 billion US dollars, accounting for 55% of foreign banking assets all over China. Beijing ranks No.10 while Tianjin and Chongqing are much more lagging behind.

The report says generally speaking financial environment in eastern cities is better than that in western part. The main reason is that in western cities, market economy doesn't play a major role while the local government has intervened more into the economic development and the legal system construction in those areas is also backward.

Li Yang, director of Financial Institute of Chinese Academy of Social Sciences has stressed that unhealthy financial environment is resulted from the system and mechanism.

Among the four Chinese municipalities, Chongqing in southwest China is facing similar problems that all the western cities face. But the rise of Chongqing is certain because when the eastern part develop to a high level, capital and investment will naturally flow to the relatively inexpensive western region. In order to attract more investment, experts suggest that Chongqing pay more attention to its systematic construction.

As for the capital Beijing, Li Yang said Beijing should better balance its relations with the central government. Beijing has a trustworthy social and cultural environment which is its advantage. But compared with Shanghai, its economic and financial market is not complete. The government still plays an important role in leading economic and financial activities. Beijing's public service has paid more attention to serving the central government which has an important impact on Beijing's financial ecological environment.

Tianjin which is adjacent to Beijing has similar problem which the government functions need further reform and legal environment and social credibility should be improved.

This was the first time that China has tried to figure out factors that affect financial development and cause bad loans or other large financial risks. And various local governments have started to clear up those administrative or other obstacles to improve financial environment which will lead to better financial development.

According to a survey conducted by People's Bank of China, during the transitional period, 70%-80% of bad loans were due to government administrative intervention. Whether market economy is dominant or not, the key is to see if the government has stopped direct intervention in and withdraw from business or financial affairs.

It's reported that the Financial Institute of Chinese Academy of Social Sciences will continue to follow the financial environment in various cities and will compile a report on financial ecological environment assessment every year till such concept of ˇ®financial ecology' is wiped out in China.

By People's Daily Online