岭南观点·27 金融体系扭曲、经济转型与渐进式金融改革

Summary

Since the emergence of the financial liberalization theory in the 1970s，there have been persistent voices from all walks of life advocating that transition economies should remove all kinds of financial repression policies in one step and arrange a financial system consistent with developed countries． But is this the best option for countries in transition with respect to financial reform and financial development? 

The failure of the large number of transition economies which implemented shock therapy and the success of China's dual-track progressive reforms have shown that radical elimination of distortions and copying the economic and financial systems of developed countries is not appropriate for developing countries． In the 1970s and the 1980s，Latin American countries，represented by Chile，carried out financial reforms which were oriented towards liberalization，marketization， and privatization，and modeled on developed countries such as the United States and the United Kingdom，but the results of the reforms were disappointing． On the contrary，since the reform and opening-up in 1978，China has also started marketoriented financial reform． Instead of simply copying the experience of developed Coundvies and implementing comprehensive privatization and liberalization，China's financial reform was conducted in a gradual and moderate way． Up to now，China has not experienced a systemic financial crisis，the financial system has remained basically stable，the economy has grown steadily，and the efficiency of the financial system has been continuously improved． Clearly，the theory of financial liberalization cannot explain either the failure of financial reform in Latin American countries or the stability and economic performance brought about by China's progressive financial reform． In view of this，this paper takes the soft constraints of the banking sector as an example to discuss the root causes of financial repression，and the necessary conditions and appropriate methods for the transition economies to successfully implement financial reforms in a theoretical framework． 

This paper points out that the financial repression policy in transition economies is essentially a constrained second best． Governments in many transition economies have implemented the catch-up strategy or import substitution strategy which violates their comparative advantages． Therefore，in the early stages of the economic transition，there are many nonviable firms left over from the former strategy，and these firms are necessary to national defense security，national economy，people's livelihood and social stability． The government needs to constantly subsidize these firms which are too important to fail，for which financial repression policy occurs as a system arrangement to subsidize these firms secretly． Based on the circumstances of the transition economies，imposing financial repression policies is rational and even necessary in a particular period． The reason why developed countries do not have a lot of financial restraints is that most their industries possess comparative advantage，and most firms can survive even without subsidies from the government． As for a small number of defense security industries that violate comparative advantage and need subsidies to survive，direct fiscal subsidies can be used，without the need to distort the financial system． 

This paper proposes that to carry out financial reform smoothly，transition economies should first improve the viability of firms by developing industries that meet the comparative advantages so as to speed up capital accumulation and transformation of comparative advantages，and then formulate phased reform goals and adopt progressive reform methods according to firms' viability． This kind of progressive financial reform，compatible with the economy's factor endowment structure and comparative advantage，can avoid the economic collapse caused by the financial reform and achieve the goal of supporting economic growth，which makes it a better way of financial transformation than shock therapy.