OPINION: China’s financial opening up under the Covid-19 pandemic

As the Covid-19 pandemic continues to sweep across the world, globalisation, trade and production activities are hit hard. Despite the pandemic’s presence, China continues to promote its financial opening-up. For starters, China is removing the restrictions on foreign financial institutions’ access to the Chinese market at a pre-pandemic pace, as well as opening-up various financial industries such as securities firms, asset management, and insurance. 

Then, China has relaxed the restrictions imposed on international capital entering the Chinese market. However, the turmoil in the international financial market caused by the pandemic is continuously affecting China’s financial system too. Due to the profound changes in the global economy and financial system caused by the pandemic, the act of reopening the financial world continues be questioned. Issues like the patterns that may crop up in the market’s opening-up in the future and the progress of the internationalisation of RMB are some questions worth pondering about.

Comparing the situation to the time before the pandemic took place, the current international financial system and the global economic landscape have undergone great changes. The pandemic has caused the global trading system to come to a standstill, disrupting personnel exchanges and logistics, thereby worsening the trend of counter-globalisation. In particular, the pandemic has hugely impacted the global industrial and supply chains. 

Following the pandemic, the reconstruction of industrial and supply chains will show a more regional trend. Officials from international organisations said that the pre-crisis international trade frictions have led to a slowdown in globalisation and will worsen further after the crisis. Barry Eichengreen, a professor of Economics and Political Science at the University of California, Berkeley, believes that globalisation has begun slowing down. 

This is not only indicated through the slowdown of trades but the increasing trade barriers and capital outflows from capital control countries too. Concurrently, global capital markets have been hit hard, and major central banks headed by the Federal Reserve have adopted a never-before-seen loose monetary policy, further reducing interest rate levels to maintain the bubble of financial assets.