BOOK REVIEWS
EURASFI (Europe- Asia Finance), La Chine: Un colosse financier? Le système financier chinois à l'aube du XXIe siècle
This book is a collective work written by members of EURASFI (Europe-Asia Finance), an association founded in June 2003 that brings together students and young researchers as well as young professionals in the financial sector, from both China and France, with the primary stated objective of fostering co-operation between Europe and Asia in the field of finance. The first concrete achievement produced by EURASFI was the publication of this book in March 2006, a work that should, conversely, be followed by the publication of a symetric effort in China, under the prospective title The French financial system within the framework of the European Union. Nine people have effectively taken part in writing La Chine: Un colosse financier? The composition of this group of authors reflects the explicit desire to strike a balance between players from the fi nancial sector on the one hand and students and postgraduates, primarily in economics and commercial law, on the other. The goal is to benefit from the experience that has been acquired by practitioners in finance who are in contact with China as well as from the academic knowledge of future researchers. The ambition of the book is first of all to draw up a status report, as complete as possible, of all aspects of the Chinese financial system at the beginning of the 21st century: following a preliminary description of the macroeconomic context in China, the work thus addresses the three pillars of the financial system (currency, means of payment, financial regulation), then the capital markets and finally the actors in intermediation (banks and insurance companies). It thus claims to be comprehensive while remaining, on each of the themes in particular, sufficiently concise to be readable. In the French language at least, it is the very first work of its kind. In practical terms, the presentation remains essentially descriptive and only incidentally provides analysis. For this account of the Chinese financial system, the authors rely on historical elements, which sometimes date back to the 19th and on occasion even to the sixth century, on contemporary regulatory or legal texts both Chinese and international that frame and govern how finance functions, and finally, sometimes, on their own concrete experience, for some of them, of finance in the People's Republic. For each of the aspects of the Chinese financial sector, for each chapter, the account unfolds chronologically: it starts out by providing a brief historical perspective, over the long or medium term, then continues with a detailed description of the evolution that has taken place since the beginning of reforms in 1978, before concluding with some prospective reflections on the current state of affairs and possible developments. The whole book draws a complete, concrete and detailed image of this financial system. Although the study has no major faults, in the final analysis, its angle appears somewhat restricted to two perspectives: one, which we may call external, is the integration of the Chinese financial system in the international financial order, and, reciprocally, the adaptation of international regulatory models to the Chinese case; the other, which we may call internal, is that of the process through which new financial institutions are emerging in response to the requirements of a Chinese economy that is evolving into a market economy. What impression is the reader left with? Firstly, one is struck by the exponential growth of legislation, regulations and institutions in the financial sector since the first half of the 1990s. Following some ad hoc reforms in the 1980s, a rapid evolution has taken China from the establishment of the Shenzhen and Shanghai stock markets in December 1990, through the restructuring of its banking system on the basis of the law of May 1995 and the multiplication of controlling and regulatory institutions in the years since 2000, to the opening of its domestic market to foreign banks on 1 January 2007. The initial impression is thus that rapid and extensive reforms have totally restructured the Chinese financial system from top to bottom since the 1990s. The second impression is that these reforms have followed processes very similar to those defined by the Chinese authorities in other economic sectors. First of all, as opposed to the big bang policies implemented in the former socialist states of Eastern Europe and the USSR, Chinese reforms have been gradual, always first undergoing an experimental stage, subsequently extended little by little until they affect the whole of the economy. A good example is the Electronic Interbank System (EIS). This project was launched in 1989 by the People's Bank of China with the goal of constructing in the long term a rapid and reliable national system for interbank payments. Implemented in seven cities in 1991, the EIS was gradually extended during the 1990s until it finally linked up all the branches of the People's Bank in 2002 as well as 500 branches of commercial banks throughout the country: in 2007, the EIS should finally be in use in the whole of the banking system. Another characteristic of the process of Chinese reforms that can be very clearly found in the case of the financial sector is that, during the emergence of a market, the Chinese authorities always seem very keen to give priority to the construction of a regulatory framework before they embark on the privatisation of the players on that market. This is particularly evident in the case of the stock markets in Shanghai and Shenzhen . Their supervision and their regulatory methods have been gradually improved since 1990 with the result that they now come close to international standards of transparency and efficiency, but the mission of the Chinese capital markets is to finance the state enterprise sector (p. 135), and in 2002, [the state] owns 53.5% of the market capitalisation of Shanghai and 43.7% of that of Shenzhen. (p. 142) In the financial sector as elsewhere, the desire of the Chinese government seems to be to introduce allocation mechanisms through the market, but for and between agents who remain public or collective. Here again, we are far removed from the post-Soviet big bang. In the end, the Chinese financial system has, since the beginning of the 1990s, experienced an ever more rapid and extensive evolution, but one that still remains gradual and prudent and that favours the liberalisation of allocation procedures over that of economic actors. These transformations cannot proceed, evidently, without creating their share of tensions and contradictions between new modes of resource allocation and the institutional but also psychological and mental legacy of the planned economy, and between a nascent Chinese financial system and the international financial order in which it seeks to be integrated. There is no question that this work therefore constitutes the first reference work in the French language on the Chinese financial system. Its primary quality is its exhaustive scope, as much in the number of aspects it deals with, from the problem of payment systems, though the establishment of stock markets and the problem of bad debts, as in the precisionno less readable for thatof each of the individual studies. That makes it indispensable for anyone who is looking for signposts as they embark on a study of the Chinese financial system or even for those who wish to become actors in this environment. One criticism that could be made, in the final analysis, is that the work restricts itself to description. The status report on the Chinese financial system quasi-automatically generates a series of questions on its birth, its development, its future. These questions are barely even mentioned by the authors and when they are, it is seemingly from a single point of view: what place and role might the Chinese financial system hold in the international financial order in the years to come? Unfortunately, the answers to this type of question can only be a matter of conjecture, and it would have been more interesting, and less speculative, to approach the question of why and how a modern and liberal financial system has developed at this moment and at this stage of China's development. In the end, La Chine: Un colosse financier? emerges as the sum of prior knowledge necessary for a future analysis and understanding of the Chinese financial system. The work asks few questions, and provides even fewer answers, but contains the concrete elements, the knowledge and the references that will enable anyone examining the Chinese financial system to lay the foundations and construct a framework for their own responses.
