Prof. Liu Xiaoxuan mainly introduced a research on promotion of financial marketization which they carried out in the past two years. She pointed out the major problem with China’s financial market at present, that is, information asymmetry caused by financial monopoly is being intensified and it’s very hard to narrow the credit gap. Judging from the research results, in terms of financial subjects, the phenomenon of state-owned monopoly is very serious, with extremely low proportion of non-state-owned leadings; the four major banks, namely, ICBC, Agricultuarl Bank of China, Bank of China, China Construction Bank, mainly serve big cities, large projects and large and medium-sized SOEs, with private micro, small and medium-sized enterprises and SOHOs having little access to service of financial organizations.

In terms of the root causes, Prof. Liu said that high borrowing costs due to information asymmetry, insufficient mortgage and guarantee capacity of enterprises, and complicated procedures all make it hard for financing demand of enterprises to be transformed into effective demand. After introducing four levels of the financial market, she argued that different methods should be used in different levels of the financial market instead of using the same standard in all levels of the financial market.

She also introduced the newly emerging financial market, such as micro credit companies, village banks, and guarantee companies. She pointed out that lowering financial market entry barriers will break the monopoly and reduce costs of obtaining information. This sort of financial market liberation will both promote the optimization of the administration mechanism of grass-root banks and help to transform the ineffective demand of enterprises into effective demand.

January 16th, 2012