Pursuing a Financial Development Path with Chinese Characteristics to Boost China’s Strength in Finance

Pursuing a Financial Development Path with Chinese Characteristics to Boost China’s Strength in Finance

XI JINPING

I

Since the 18th National Congress of the Communist Party of China (CPC) held in 2012, we have explored the laws governing financial development in the new era and steadily deepened our understanding of the fundamental nature of finance under socialism with Chinese characteristics, paving the way for innovations in financial practice, theory, and institutions. These endeavors have allowed us to build a valuable body of experience and gradually forge a path of financial development with Chinese characteristics.

First, upholding the centralized, unified leadership of the CPC Central Committee over financial work

Our Party’s leadership is the defining feature of China’s path of financial development and our country’s greatest political and institutional advantage in pursuing financial development. All of China’s major accomplishments in this field have been attained under our Party’s leadership. Many of the issues in the financial system can be traced to the failure of numerous financial institutions to effectively implement the Central Committee’s decisions and plans, the weakening and hollowing of Party leadership, and insufficient emphasis on strengthening the Party politically, improving Party conduct, and building integrity. For these reasons, it is essential to reinforce the Central Committee’s centralized, unified leadership over financial affairs and give full play to the Party’s core role of exercising overall leadership and coordinating the efforts of all sides. This will ensure that financial work advances consistently in the correct direction.

Second, guiding our work with people-centered values

Financial endeavors led by our Party must always deliver benefits to the people. This is in fundamental contrast to certain other countries where the very nature of finance is to serve the interests of capital and the wealthy few. On the new journey in the new era, we must stand firmly on the side of the people, make financial services more diverse, inclusive, and accessible, and better protect the rights and interests of financial consumers.

President Xi Jinping delivers a keynote speech at the Central Financial Work Conference. The conference was held in Beijing, October 30 and 31, 2023. PHOTO BY XINHUA REPORTER JU PENG

Third, remaining committed to serving the real economy as the fundamental purpose of finance

The real economy is the foundation of finance, and finance is the lifeblood of the real economy. It is the inherent mission of finance to serve the real economy. If finance becomes consumed by self-serving circulation and its own unchecked expansion, it will become little more than a body of water without a source or a tree without roots. And sooner or later, crisis will follow. China’s financial sector must stay true to its core mission of serving the real economy and promote high-quality development. We must never allow it to become decoupled from the real economy.

Fourth, treating risk prevention and control as an enduring task of financial work

While the functions of finance are to manage and allocate risk, risk is also built into the very DNA of finance. China’s financial sector has undergone profound expansion in both scale and complexity, and the risks involved have become far more systemic and interconnected. It is essential to become more mindful of potential risks, ensure effective risk prevention and control, and bolster the resilience of the financial system.

Fifth, advancing the innovative development of finance through market- and law-based means

The security of finance is based on sound institutions, its vitality rooted in the market, and its order underpinned by the rule of law. Given that financial transactions involve intricate and multifaceted webs of rights and obligations and are characterized by information asymmetries, they demand an exceptionally high degree of trust. A robust regulatory system is therefore indispensable. We must establish a comprehensive framework of financial laws and market rules under which prohibitions are strictly enforced and lawbreakers are prosecuted. This will ensure that financial markets can operate efficiently.

Sixth, furthering supply-side structural reform in the financial sector

A defining feature and strength of China’s financial system lies in the central role played by state-owned financial institutions. Yet challenges remain, such as an overreliance on indirect and debt financing, insufficiently inclusive financial services, along with issues like excessive financialization, unregulated financial activities, and many illicit financial practices. To address these problems, we must further supply-side structural reform in the financial sector. We need to strike the right balance between indirect and direct financing, and between equity and debt financing. We must also structurally optimize the financial system, improve financial infrastructure, and raise the quality and efficiency of financial services.

Seventh, ensuring both financial openness and security

The opening up of the financial sector must be premised on safeguarding our national financial and economic security. We must guard against not only risks inherent in the process of opening up, but also those deliberately created by strategic rivals. It is essential to carefully manage the pace and intensity of opening up, effectively strengthen financial regulation, and ensure that higher-standard financial opening up is underpinned by more efficient risk prevention and control.

Eighth, pursuing progress while ensuring stability

In financial work, we must stay committed to pursuing progress in our performance while ensuring stability, promoting stability through progress, and introducing new policies before abolishing the old. Stability must be the overriding priority in macro regulation, financial development, financial reform, financial regulation, and risk resolution. Financial policies should be neither eased nor tightened too abruptly, so as to avoid sharp fluctuations. At the same time, we must actively push ahead. We should move swiftly to put in place what needs to be established and steadily resolve problems while remaining on a stable footing and maintaining a steady trajectory. Monetary policy should remain stable, with flexible use of a range of policy tools to promote sound and steady macroeconomic development.

These principles shed light on how we should understand and carry out our financial work in the current era. Taken as an integrated whole, they reflect the fundamental stance, perspective, and methodology of the path of financial development with Chinese characteristics. This path aligns with the objective laws governing the development of modern finance. More importantly, it is endowed with features that make it especially suited to China’s national conditions. It is a path that is fundamentally different from Western financial models. Proceeding with firm confidence, we should continue to explore and refine this path in practice, ensuring it opens up even broader prospects as we advance.

II

I put forward the goal of accelerating efforts to boost China’s strength in finance at the Central Financial Work Conference. So what does this goal specifically entail? It requires a robust economic foundation, along with world-leading economic strength, scientific and technological capabilities, and composite national strength. In addition, it also encompasses a key set of core financial elements.

First, we should possess a strong currency that is widely used in international trade, investment, and foreign exchange markets, with global reserve currency status. Second, we should have a strong central bank that is capable of effective monetary policy regulation and macro-prudential regulation, and can promptly and effectively prevent and defuse systemic risks. Third, we should have strong financial institutions that feature high operational efficiency and risk resilience, provide a comprehensive range of services, and possess global presence and international competitiveness. Fourth, we should have strong international financial centers that can attract global investors and exert influence over international pricing systems. Fifth, we should have a strong financial regulation framework that is underpinned by a sound financial legal system and carries significant voice and influence in shaping international financial rules. Sixth, we should cultivate a strong contingent of financial talent.

China has already become a major financial country. It has the world’s largest banking sector and foreign exchange reserves, second-largest bond and stock markets, and top-tier insurance market. Yet on the whole, our financial sector, though large in size, is not yet strong. Building true strength in finance remains a long-term undertaking that will require sustained efforts.

To achieve this goal, we must move faster to build a modern and distinctively Chinese financial system.

First, sound and prudent financial adjustment and control

We need to establish a modern central banking system, improve the modern monetary policy framework with Chinese characteristics, and refine the mechanisms for base money supply and money supply regulation. We need to leverage the aggregate and structural functions of monetary and credit policy tools and effectively keep the value of the RMB and the broader economic and financial system stable.

A seminar for principal provincial- and ministerial-level officials on promoting high-quality financial development is held at the Central Party School (National Academy of Governance), January 16, 2024. President Xi Jinping delivers a keynote speech at the opening ceremony. Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang, Li Xi, and Han Zheng attend the event. PHOTO BY XINHUA REPORTER SHEN HONG

Second, a well-structured financial market

We need to move faster to build a capital market that is secure, well-regulated, transparent, open, vibrant, and resilient. This involves fostering a multi-tiered equity market, improving the quality of listed companies, and improving the regular delisting mechanism. We need to leverage the role of venture capital and private equity in supporting technological innovation and strengthen the functions of the bond, money, and foreign exchange markets.

Third, financial institutions centered on a division of labor and collaboration

China possesses a full spectrum of financial institutions. What is key, however, is that these institutions complement each other’s strengths and pursue differentiated development. Each institution must fulfill its respective role and play to its strengths in serving the real economy. Staying true to their original mission, all financial institutions need to refocus on their core functions. They need to make serious efforts to boost their competitiveness and service capabilities so as to meet the multi-tiered and diverse financial service needs of the real economy and the general public.

Fourth, comprehensive and effective financial regulations

Financial regulation should be strengthened across the board. We need to ensure full coverage by enhancing the regulation of institutions, conduct, and functions, and bolstering look-through supervision and ongoing supervision. Additionally, regulation must be made more forward-looking, targeted, coordinated, and effective in nature, so as to create a robust safety net for the financial sector.

Fifth, diversified and specialized financial products and services

We need to strengthen the provision of high-quality financial services for major national strategies, key sectors, and weak links. We need to make strong headway in the five priority areas of technology finance, green finance, inclusive finance, pension finance, and digital finance, and accelerate the digital and intelligent transformation of the financial sector.

Sixth, a self-supporting, risk-resilient, secure, and efficient financial infrastructure

We need to strengthen overall planning and improve market access standards, regulatory standards, and operational requirements, so as to ensure that we are more self-supporting in critical financial infrastructure and that such infrastructure is more secure and reliable in terms of hardware and software.

III

To promote high-quality financial development and boost China’s strength in finance, we must integrate the rule of law with the rule of virtue, vigorously promote the best elements of traditional Chinese culture, and actively foster a distinctively Chinese financial culture.

First, operating in an honest and trust-worthy way and never crossing the line

Traditional Chinese culture places great weight on integrity and keeping one’s word. As the financial sector is built on trust, it must be all the more steadfast in honoring the spirit of the contract and abiding by market rules and professional ethics. The tradition of “ironclad calculations, bookkeeping, and rules” should be carried forward. Fraudulent accounting must never be tolerated. It is vital to honor one’s debts, cherish one’s reputation, and avoid debt delinquency. To this end, industry self-discipline must be strengthened, and lifetime bans imposed on those guilty of serious breaches of trust.

Second, prioritizing the greater good in the pursuit of interests, rather than placing self-interest above all else

Traditional Chinese culture holds that “those who put principle before profit earn honor, while those who put profit before principle earn disgrace.” Placing self-interest above integrity has always been disdained by people of virtue. Finance is both functional and profit-driven in nature, yet the pursuit of profit should never be prioritized over the functional role of finance. The financial sector must fulfill its social responsibilities and promote symbiotic development between finance on the one hand and the economy, society, and the environment on the other.

Third, taking a steady and prudent approach and resisting the urge to pursue quick gains

Traditional Chinese culture teaches that “haste leads nowhere, and preoccupation with petty gains prevents great accomplishments.” The overriding secret behind some world financial institutions that have endured for over a century and enjoyed lasting success lies in a prudent and steady approach. It is important to establish sound perspectives on operations, performance, and risk management in the financial sector. Organizations must operate in a steady and prudent manner, giving consideration to immediate priorities, but more importantly, to long-term imperatives. In practice, this means resisting the temptation of short-term windfalls, avoiding reckless expansion, and never taking risks beyond one’s capacity.

Fourth, upholding fundamental principles while breaking new ground and ensuring finance does not become decoupled from the real economy

It is critical to address the fundamental questions of whom finance serves and why innovation is pursued. Innovations should be geared toward better serving the real economy and creating greater convenience for the people. Pseudo-innovation and reckless experimentation must not be tolerated.

Fifth, upholding the law, ensuring regulatory compliance, and refraining from misconduct

Legal and regulatory compliance is particularly important in financial operations. Financial institutions and practitioners must strictly abide by laws and regulations and consciously operate within the permitted scope of regulation. They must never seek profits by exploiting legal and regulatory loopholes or circumventing oversight, let alone by crossing red lines or operating outside the law.

The above is an excerpt from a speech delivered by President Xi Jinping at a seminar for principal officials at the provincial and ministerial level on promoting high-quality financial development, January 16, 2024.

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