英国顶级高校 伦敦政治经济学院 毕业论文完全英文版.docx
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英国顶级高校伦敦政治经济学院毕业论文完全英文版
MG415
SummativeEssay
Systemreformandpolicy
Problemofregulatingfinancialmarket
(inChina)
CandidateNo36332
2010-2011
PublicManagementandGovernance
DepartmentofManagement
Course:
MG415PolicyAnalysis,EvaluationandImplementation
DateofSubmissionrequired:
23rdMay2011
(5,655words,excludingreferences)
AConciseAnalysisandEvaluation
ontheFinancialRegulationinChina
Introduction:
SinceChinainitiateditseconomicreformmorethan30yearsago,China’sfinancialindustryhasgrownupsorapidlythatitattractsincreasinginternationalattentions.Accordingtostatistics(thePeople’bankofChina,2011),thetotalassetsofChina’sfinancialindustryin2009amountsto153,800billionU.S.dollars,whichismorethan300foldsofthatintheyear1978whenChinanewlyunveileditseconomicreformandopeneduptotheoutsideworld.AstrikingfeaturewithChina’sfinancialindustryisthat,fordecades,ithadsurvivedsomanyturbulencesandchallenges,includingtheeconomicchaosinlate1980sresultingfromfoodpricereform,spilloverofthefinancialcrisisintheSoutheastAsia,directandintensecompetitionsfromforeignbanksafterChina’saccessiontotheWTOin2002,aswellasthecurrentfinancialcrisiscommencingfrom2008.Nowonderthatpeople,especiallytheyoungChinesepatrioticclaimthatChina’sfinancialindustry,particularlyChina’sfinancialregulatorshavebeenperformingwellenough.ThisleadstotheillusionthatthecurrentfinancialregulationinChinaisnearperfection,andeventhatregulatorsfrommodernwesterncountriesshouldreflectandconsiderlearningsomethingfromtheirChinesepeers.Tryingtoanswerthisquestion,Iwillelaborateonitinthisessay,whichconsistsof4sections.
InSection1,Iwillfocusonthetheoriesoffinancialregulationandtrytoexaminethefollowingpoints:
whyshouldweregulatefinancialindustry?
Whatisthegeneralapproachforfinancialregulation?
Whatcanbedeemedastheappropriatequalitativeandquantitativemeasurementsforfinancialregulationandsupervision?
InSection2,IwillexploreintothecurrentstructureandarrangementforfinancialregulationinChinaandtracebacktoitshistorybackground.Also,acomparisonismadeonthefinancialregulationpracticesbetweenChinaandU.K.,toinvestigatewhetherornotapparentsimilaritiesanddifferencesareexistingbetweenthetwocountrieswithregardtotheregulatoryandsupervisorystructure,sourcesoffunding,regulatoryobjectivesandsoon.TheSection3willfocusonanalysisandcommentontheChina’sfinancialregulation.Mainly,itwillreviewwhetherthecurrentregulationshavebroughtabouteffectiveoutcomes,advantageanddisadvantageofthecurrentregulatoryarrangement,andvariousrecommendationsforpolicyandsystemreformandtheirvalidity.Also,itwilldiscusspathdependencyinChinesefinancialregulationthroughconsiderationofthenatureofChina’seconomicreformfordecades.ThiswillfinallyleadtoSection4,whichistheconclusionofthisessay.Becausethebankingindustrypossessesmorethan93%ofChina’sfinancialresources,MyessaywillmainlyfocusonfinancialregulationinBanking.
Section1Rationale,generalapproachandmeasurementoffinancialregulation.
Financialindustryseemstobeoneofthemostfragileindustriesintheworld.SincetheIndustrialRevolutioninwesterncountriesinthe18thcentury,theworldhasexperiencedfinancialcrisisdozensoftimes,fromtheGreatDepressioninthelate1920s,Asia’sfinancialcrisisin1997,anddowntothecurrentcreditcrunch.Thiswillcertainlyraisequestionsontheimportanceandeffectivenessoffinancialregulation.Fromtimetotime,thepublic,politicians,andtheacademicshaveaskedthesamequestions.Doesthecurrentfinancialregulationprovidesufficientoversightandatthesametimemitigatefinancialrisks?
Wouldthesituationhavebeennotsobadifwehadbeengivenbetteralternativeregulationarrangements?
Thesetrickyandhauntingquestionshaveprofoundanddeepmeaning.Onewillnotunderstandclearlyuntilhe(she)isconvincedbythetheoriesoffinancialregulation.
Fromthe18thcenturytotheearlier1930s,acrossthemajorwesterncivilizedcountries,themajordutiesoffinancialregulators,mainlythecentralbanks,weretoactaslendersoflastresortandimplementthedepositinsurancesystem.ThesetwomainpolicyarrangementswereheavilycriticizedbyHayek(1976)andDowd(1996),whoarguethatmarketcancorrectitsownerrorandimperfectionthroughexpansionandself-adaptationatlast.Thetotalpowerofcentralbanksshouldbediminishedsoastotackleinflation.Atthesametime,allpeopleshouldbefreetousecurrencyoftheirownchoicessoastoavoidthenegativeimpactofinflation.Moreover,theyclaimthatthereshouldbenowrongwithfreetradeandlaissez-faireinfinancialservicessectoriffreetradeisgenerallydesirable.Theirclaimhasbeenechoedbyotheracademicliberals(Benston,1996;Kane,1997)whofurtherarguethateventhereismarketfailure,financialregulationmaystillbeundesirable,unnecessaryandcan’tinpracticesolvethefailures,andmayleadtoabundantlyexcessiveregulationcostsandinduceseriousmoralhazards.Theseliberalideologiesineconomicsmaynotturnouttobecompletelyconvincingifoneconsidersthedevastatingresultsoffinancialcrisisthroughouthumanhistory.Stiglitz(1993)examinestheimportanceofinformationinfinancialmarketandidentifiessevenmarketfailuresandclaimsthatinformationisapublicgoodandthatregulationcanleadtoParetooutcomebyprovidingenoughinformationthatotherwisewouldnotbeprovidedunderfreefinancialmarket.
Llewellyn(1999)outlines6potentialbenefitsoffinancialregulation:
①toreducetransactioncostsforconsumers;②tomitigateoramelioratemarketfailuresoastoachieveefficiencygains;③toimproveandmaintainconsumerconfidence;④togeneratepositiveexternalities;⑤toexpelhazardousfirmsfromthemarketthroughefficientauthorizationprocedures;⑥tomakesurethatconsumerscanhaveinformedandreasonablejudgmentsanddecisionsbyincreasingtransparencyofcontractsanddisclosingduecomprehensivemarketinformation.Inadditiontothecomprehensiverationaleforfinancialregulation,hefurtherpointsoutthatefficientlyframedregulationhasitslimitationandinrealityisunabletocoveralltherisks,therefore,efficientregulationshouldneverdiminishtheincentiveforconsumerstoexerciseduecarewhiletheyarepurchasingfinancialproductsandservices.
Goodhart(1998)demonstratesthatregulationshouldbeneededsoastorefrainmonopolyoroligopolyfromexploitingconsumers,toprotectsmaller,retailclientswhoarelessinformed,tomaintainfinancialsystemicstability.Theyfurtherexamineandprovethatsystemicriskinvolvedinbankingindustryisconsiderablymoreevidentthaninnon-bankingfinancialservicesinthatthefailureofonebankcanbeofcontagionandleadtothewithdrawofdepositsfromotherbanksandthereisnowell-establishedsecondarymarketinbankloans.
Davies(2008),however,putsitverysimplethatweneedregulationoffinancialfirmsbecauseweneedtoprotecttheLenderofLastResortanddepositprotectionschemes.Moreover,thereisinformationasymmetrybetweenfinancialservicesprovidersandconsumers,andfinancialregulationandsupervisionmaybeabletocorrectsuchasymmetry.
Goodhart(1998)identifiesthegeneralapproachoffinancialregulationthroughincentivestructures:
①Regulationshouldberegardedasasetofcontracts;②Moreemphasisshouldbelaidoninternalriskanalysis,managementandcontrolsystemsandsoon.
Sincethelate20thcentury,scholarshaveproposedacoupleofmeasurementstofacilitateregulationfromMacro-prudentialtoMicro-prudentialdimensions.Sundararajan(2002)createdfinancialsoundnessindicatorswhichincludecoresetandencouragedset.Thecoresetindicatorsmainlycovercapitaladequacy,assetquality,earningandprofitability,liquidityandsensitivitytomarketriskandotherfactorsofdeposit-takinginstitutions.Thesedetailedindicatorsincluderegulatorycapitaltorisk-weightedassets,nonperformingloanstototalgrossloans,returnonassets,liquidassetstototalassets,durationofassetsandsoon.Financialregulatorsarestronglyrecommendedtoapplythesecoresetindicators.Additionally,theencouragedsetindicatorscoverwiderrangeoffactorsinnonbankfinancialinstitutions,corporatesector,householdsandrealestatemarkets.
Hilbers(2000)proposedmacro-prudentialindicatorswhichintegratesaggregatedmicro-prudentialindicatorswithmacroeconomicindicators.Theaggregatedmicro-prudentialindicators,whicharebasedontheCAMELSframework(capital,assets,management,earnings,liquidityandsensitivitytomarketrisk),includeaggregatecapitalratios,sectoralcreditconcentration,expenseratios,returnonassets,centralbankcredittofinancialinstitutions,foreignexchangerisk,marketpricesoffinancialinstrumentsandotherratios.Themacroeconomicindicators,ontheotherhand,focusoneconomicgrowth,balanceofpayments,inflation,interestandexchangerates,lendingandassetpricebooms,contagioneffectsandotherfactors.Thesefactorscanbemeasuredbyaggregategrowthrates,currentaccountdeficit,volatilityininflation,volatilityininterestandexchangerates,lendingbooms,financialmarketcorrelation,directedlendingandinvestmentandotherratiosorfigures.
Itisallknownthatacademicsaroundtheworldstillproducenosignificantandreliablequantitativemeasurementtogaugeconsumer’sprotectioninfinancials