How President Xi Jinping Has Charted the Course for Boosting China’s Strength in Finance

As the nucleus of the modern economy, finance constitutes a vital pillar of a country’s core competitiveness and a critical area of major-country competition. Since the 18th CPC National Congress held in 2012, President Xi Jinping has put forward a series of important statements on major theoretical and practical issues related to financial development, from calling for “an accurate understanding of finance at its essence,” to charting “a path of financial development with Chinese characteristics,” to defining the goal of boosting China’s strength in finance. Such major pronouncements have given shape to the financial chapter of Xi Jinping thought on the economy.

A matter of great national importance

As President Xi has pointed out, “Finance is a matter of great national importance and bears directly on the overall drive for Chinese modernization.” Only a financially strong nation can truly prosper, and only a prosperous nation can sustain a flourishing financial sector.

Modern history shows that the rise of every major country has been accompanied by a powerful and mature financial system, with the two elements shaping and reinforcing each other. In the 17th century, the Netherlands propelled global commerce forward by pioneering the joint-stock system and the stock exchange. Underpinning the credibility of the country was its powerful naval force and robust commercial networks. In the 19th century, Britain established its financial system under the sterling-based gold standard, making London an international financial hub. This system was sustained by the country’s formidable industrial production capacity. In the mid-20th century, America was able to secure financial hegemony thanks to the strength of the US dollar and its developed markets, both of which were ultimately attributable to the country’s preeminent composite strength. Just as President Xi has remarked, “The rise of major countries cannot happen without the key support of robust financial systems.” A nation strong in finance, he has noted, “should possess a robust economic foundation, along with world-leading economic strength, scientific and technological capabilities, and composite national strength.”

Today, China has firmly established its position as the world’s second largest economy. Distinctive institutional strengths, an enormous market, the world’s most complete industrial system, and a deep reservoir of human resources together provide a solid basis for boosting China’s strength in finance. To make faster progress toward this goal, China needs to translate the advantages offered by its composite national strength into a powerful financial capacity, which in turn will provide a strong foundation for advancing Chinese modernization.

Finance is a strategic pillar with a great bearing on national development and security. Time and again, history has demonstrated that modern finance is a double-edged sword. While it can greatly enhance the efficiency of resource allocation and drive significant economic growth, it can also just as easily escalate localized risks into systemic crises. In this regard, the 2008 international financial crisis provides the most profound lesson. Originating in the American housing market and triggered by derivatives and runaway leverage, this global catastrophe dealt a devastating blow to the world economy and laid bare just how contagious and destructive financial risks can be. This is precisely why President Xi has described safeguarding financial security as “a major issue of strategic and fundamental importance to our country’s overall economic and social development.” Boosting China’s strength in finance is not only an inherent requirement for improving the efficiency of resource allocation, but also a strategic necessity for fortifying our national security defenses. We must adopt a systems-based approach to ensuring both development and security and see that our country’s financial development provides the ballast needed to keep the great ship of Chinese modernization steadily sailing forward.

Finance is the lifeblood that powers high-quality development and determines success in international competition. To be strong in finance, a country must possess a strong currency and central bank, strong financial institutions and international financial centers, strong financial supervision, and a robust contingent of competent financial personnel. Of these, currency represents a country’s credit. A strong currency is thus the central pillar and anchor of value underpinning the strength of a nation strong in finance. A strong central bank—the key sluice gate for money supply—serves as the linchpin to keep the financial system operating soundly. Financial institutions and international financial centers serve as vehicles and platforms for financial resources; their strength determines the financial system’s efficiency and dynamism. Effective financial supervision and high-quality financial personnel provide the guarantees and professional support to ensure the financial system functions well. Based on these six elements, President Xi has set forth fundamental requirements, including “having the capability for effective monetary policy regulation and macro-prudential regulation and being able to promptly and effectively prevent and defuse systemic risks,” and developing “a sound financial legal system.” In addition, he has also depicted a strategic vision for our country: having “global reserve currency status,” the ability to “attract global investors and exert influence over international pricing systems,” and “a significant voice and influence in shaping international financial rules.”

An electronic display board at the London Stock Exchange welcomes the Ministry of Finance of the People’s Republic of China on the morning of April 3, 2025, local time. The ministry issued China’s first-ever RMB-denominated sovereign green bond, worth 6 billion yuan, in London, April 2. PHOTO BY XINHUA REPORTER LI YING

Pursuing a path of financial development with Chinese characteristics

China’s financial history provides a profound reminder that steady and sustained progress is only possible if the country stays grounded in its national realities, grasps the laws underlying development, and follows the right course. Since the 18th National Congress of 2012, the CPC Central Committee has actively explored the laws governing financial development in the new era and successfully led the country in resolutely forging a path of financial development with Chinese characteristics. The core tenets of this path—fundamentally distinct from Western financial models—are distilled into eight key principles.

These eight principles shed light on how to understand and carry out financial operations on the new journey in the new era. As an integrated whole, they represent the fundamental stance, perspective, and methodology of China’s path of financial development.

·Upholding the CPC Central Committee’s centralized, unified leadership over financial endeavors provides the fundamental political guarantee.
·Guiding financial activities with people-centered values defines the value orientation.
·Remaining committed to serving the real economy as the fundamental purpose makes clear the inherent mission and essential function of finance.
·Treating risk prevention and control as an enduring task of financial activities is essential to safeguarding the stability and security of the financial system.
·Advancing the innovative development of finance through market- and law-based means indicates both the driving force and pathway for development.
·Furthering supply-side structural reform in the financial sector is fundamental for making financial services more adaptable to demand and more competitive.
·Ensuring both financial openness and security represents the cardinal rule for navigating complex conditions.
·Pursuing progress while ensuring stability clarifies the strategies and methods for effectively conducting financial activities. Of these eight principles, the first one holds overarching importance. President Xi has declared, “Our Party’s leadership is the defining feature of the path of financial development with Chinese characteristics and our country’s greatest political and institutional advantage in pursuing financial development.” This feature and strength are vital for ensuring that financial operations adhere to and serve the overall development of the Party and the country and consistently advance in the right direction. It has enabled China to successfully avoid the problematic situation seen in the West where social fractures are deepened as a result of financial oligarchs manipulating public policy. In recent years, the CPC Central Committee has established the Central Financial Commission and the Central Financial Work Commission. It has also formulated and issued trial regulations on holding accountable for failure to prevent or defuse financial risks. Thanks to these efforts, the systems and mechanisms by which the CPC exercises leadership over financial management have been continuously refined.

Upholding finance’s fundamental purpose of serving the real economy is crucial to enhancing the core functions of the financial sector. Western financial models regard the self-appreciation of capital as their ultimate goal. This makes them prone to decoupling from the real economy and systemic crises. This was borne out by the outbreak of the 2008 international financial crisis and its prolonged repercussions. President Xi has stressed time and again that “finance and the real economy exist in a relationship of symbiosis and shared prosperity.” He has also emphasized that “the inherent mission of finance is to serve the real economy.” Financial development must be rooted in our endeavors to expand the real economy and especially to build a modernized industrial system. At present, the phenomenon of funds simply circulating within the financial sector for arbitrage has yet to be eradicated, and the adaptability of financial supply to key sectors in the real economy such as technological innovation and green development still needs to be improved. It is thus vital to deepen supply-side structural reform in the financial sector. Through measures such as optimizing institutional design and developing direct financing, we can steer capital to where it is needed most in the national economy.

Ensuring both financial openness and security is an important methodology for boosting China’s strength in finance. In the new era, China has ensured the sound operation of the Shanghai-Hong Kong Stock Connect and the Bond Connect. It has also secured steady progress in internationalizing the RMB and developing Shanghai as an international financial center. Through such initiatives, it has continued to expand financial opening up while also steadily reinforcing its security shields, thereby creating seamless unity between its efforts to enhance competitiveness and ensure security in the financial sector. Yet we must also remain soberly aware that major-country competition is becoming more intricate and intense, the risk of volatility in global financial markets is intensifying, and the external environment is more complex and severe than ever. Therefore, we must continue to bolster domestic financial markets and hone our own capabilities. We should promote high-standard financial opening up, particularly at the institutional level, set the right pace and intensity in opening up, and pursue higher-standard financial opening up on the basis of more effective risk prevention and control.

Moving faster to develop a modern financial system with Chinese characteristics

Boosting China’s strength in finance requires a robust framework of systems. Specifically, there are six pillars that should underpin this endeavor: a sound and prudent financial regulatory system, a well-structured financial market system, a system of financial institutions centered on a division of labor and collaboration, a comprehensive and effective financial supervision system, a diversified and specialized system of financial products and services, and a self-supporting, risk-resilient, safe, and efficient system of financial infrastructure. Together, they provide the strong support necessary to build China into a nation strong in finance. It is essential to apply systems thinking and pay close attention to overall planning and coordination, so as to advance the development of all six systems and achieve faster progress in establishing a modern financial system with Chinese characteristics that is highly adaptable, competitive, and inclusive. At the same time, while keeping in mind the need for balance and alignment between different systems, we should also strive to secure breakthroughs in key areas.

The core function of the financial regulatory system is to provide institutional guarantee for the long-term, stable operation of the economy and the financial system, and to deliver timely and effective adaptive regulation in response to short-term fluctuations. At the 19th CPC National Congress of 2017, it was stated that the framework of regulations underpinned by monetary policy and macro-prudential policy would be improved, thus filling the gap between monetary policy and micro-prudential supervision. This dual pillar framework marked a further improvement in China’s financial regulation system.

Currently, China is witnessing an increase in the interconnectedness between its economy and financial system, in the complexity of the financial system itself, and in the spillover effects and linkages between international and domestic financial markets. Therefore, giving higher priority to developing a sound and prudent financial regulatory system is imperative. At the present stage, to address the growing external impact and the pronounced domestic imbalance between strong supply and weak demand, we must continue to apply an appropriately accommodative monetary policy. Promoting steady growth and an appropriate price recovery should be key considerations in its implementation. Meanwhile, it is necessary to expand the coverage of the macro-prudential regulation system and improve its ability to respond to shocks. This system should serve to identify and assess salient risks and weak links in key areas—systemically important financial institutions, cross-border capital flows, financial markets, the real estate market, and internet finance—thereby ensuring that no systemic financial risks arise.

While financial innovation is the driving force behind financial reform and development, it can also easily become a trigger of risk. The strategic goal of boosting China’s strength in finance inherently requires a modern financial supervision system that is both comprehensive and effective. “Comprehensive” means that all financial activities, especially illegal ones, should be subject to supervision in accordance with the law, without exception. “Effective” means that supervision must become more forward-looking, targeted, and coordinated, and must reverse the tendency to prioritize development at the expense of supervision.

From establishing the National Financial Regulatory Administration to furthering reform of local financial regulatory systems, China has continuously refined and strengthened the financial supervision system in recent years. To strengthen our oversight capacity across the board, we must enhance institutional regulation, conduct regulation, functional regulation, look-through regulation, and ongoing regulation, thereby eliminating all gaps and loopholes. We should also leverage technologies such as big data, artificial intelligence, and cloud computing to enrich our regulatory toolkit and accelerate the digital and smart transformation of supervision.

The central role of a diversified and specialized financial product and service system is to effectively match the supply of financial resources to the needs of economic and social development. In recent years, China’s financial sector has continued to strengthen its support for the real economy. During the 14th Five-Year Plan period (2021-2025), the banking and insurance sectors channeled 170 trillion yuan of new funding to the real economy. Lending to small and medium-sized tech firms, inclusive loans to micro and small businesses, and green development loans each registered average annual growth of over 20%, ensuring more targeted support for key areas.

Despite this progress, however, the mismatch between supply and demand in the financial sector has yet to be fully resolved. On the one hand, the demand for effective financing to support major strategies, key areas, and weak links has yet to be fully satisfied. On the other hand, some financial resources are still locked in inefficient uses or simply circulating within the financial system. To address these issues, we must enhance financing accessibility and achieve better micro-level alignment of supply and demand by offering more specialized products and services.

The immediate priority is to establish a specialized supply system to meet a diverse range of needs through technology finance, green finance, inclusive finance, pension finance, and digital finance. Each of these carries its own imperatives. Technology finance hinges on the ability to identify risks and provide whole-of-chain and lifecycle support to enterprises. Green finance requires unified standards along with proper incentives and constraints. Inclusive finance must strike a balance between accessibility and sustainability. Pension finance must be based on long time horizons and security, while the priorities of digital finance should be empowerment and risk control. As an example, consider technology finance. Technological innovation entails long development cycles and heavy investment, while the value of patents and other intangible assets is inherently difficult to appraise. As a result, the indirect financing system is ill-suited to financing needs in this domain. Therefore, to effectively address the mismatch between traditional financing models and the funding needs of technological and industrial innovation, we should develop multi-tiered capital markets and improve the intellectual property assessment and trading mechanisms.

Nurturing a financial culture with Chinese characteristics

Boosting strength in finance requires us to enhance not only China’s hard power but also its soft power. With an outstanding financial culture, we can shape the values that orient the financial sector, create internal incentives and constraints, and provide the moral foundations for the law and supervision. In this regard, President Xi has stressed the need to operate in an honest and trustworthy way and never cross the line; to prioritize the greater good in the pursuit of interests, rather than placing self-interest above all else; to adopt a steady and prudent approach and resist the urge to recklessly seek quick gains; to uphold fundamental principles while breaking new ground and ensure finance does not become decoupled from the real economy; and to uphold the law, ensure regulatory compliance, and refrain from misconduct. These requirements not only draw on the essence of traditional Chinese culture, but also articulate the philosophy underpinning modern finance.

Honesty is the lifeblood of finance. Since its advent, finance has been intrinsically tied to trust. China’s commercial traditions have long placed a premium on honoring one’s commitments. The requirement to operate in an honest and trustworthy way and never cross the line aims to turn the pursuit of honesty into a binding code of conduct that spans all dimensions of financial activity and ensure that financial institutions and practitioners consciously honor their commitments. In this way, the spirit of the contract, market rules, and professional ethics will become conscious norms throughout the financial sector, leaving no room for fraud or breaches of trust.

Properly managing the relationship between principle and profit is the linchpin for balancing the dual nature of finance. While capital is inherently profit-seeking, it must adhere to the baseline requirement of upholding principle. Finance is both functional and profit-driven in nature. The unique wisdom of Chinese culture lies in valuing both principle and profit, while placing greater emphasis on the former. At its core, the requirement to prioritize the greater good in the pursuit of interests aims to ensure that the pursuit of profit gives way to the functional role of finance. Financial activities must remain anchored in the overriding goals of enhancing the efficiency of the real economy and improving public wellbeing. The financial sector must fulfill its social responsibilities and develop symbiotically with the economy, society, and the environment.

Prudence can be thought of as an “immune system” preventing the spread of risk. As finance carries risk in its very DNA and has the effect of amplifying leverage, the reckless pursuit of quick gains must be avoided at all costs in the financial sector. So-called innovation and growth pursued without sufficient prudence will ultimately backfire. A steady and prudent approach must therefore become an innate part of the self-discipline and conscious practice guiding the sector. Institutions must cultivate the correct perspectives on operations, performance, and risk management. They need to strike the right balance between stability and progress, between short-term and long-term development, and between development and security, all aimed at steady and sustainable high-quality development.

(Originally appeared in Qiushi Journal, Chinese edition, No. 3, 2026)