What the financial crisis tells us
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Enhance international cooperation and coordination
The international financial crisis has highlighted the need of international cooperation in financial regulation. With the deepening of globalization, international trade and capital flow have become easier, and electronic trading has changed the traditional trading structure. Recently, the International Monetary Fund (IMF) has appealed for more coordination among different counties, and the EU has strengthened the cooperation between members, and some large international financial institutions have also accepted the supervisory college system.
There are three points that should be learned by China's financial regulators.
Strengthen macro-systemic regulation
There is no such regulatory institution in China to monitor and prevent macro-systemic risks. Judging by international experience, two ways can be used to improve macro-regulation deficiencies. First, restore the regulatory functions of the central bank so it has authority to intervene. Second, establish a special agency to monitor systemic risks.
Use principles-based regulation properly
For the time being in China, more rules-based regulation should be the focus, but as rapid market development greater financial innovation comes about, a principles-based regulation should be introduced and used properly.
Extend the scale and level of international regulation cooperation
Maintain the benefits between China and other developing countries and be active in the construction of global regulatory systems, such as the IMF reform, and G20 cooperation. In addition, China needs to play a leading role in regional regulation cooperation, especially in East Asia. And finally, China should establish bilateral regulation cooperation and joint-response systems with countries of developed financial markets.
The author is a researcher of China Institute of International Studies.
(This article is translated by Lin Liyao)
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