Premier Wen Jiabao emphasized, during his investigative tour on April 3 of enterprises in Fujian province facing financing problems, that the central authorities have "unified their thoughts" on the necessity of breaking the monopoly of State-owned banks and opening up the financial sector so that private capital can feed cash-starved smaller enterprises.
Nickle and dime [By Jiao Haiyang/China.org.cn]
Wen's comments come hard on the heels of the announcement that Wenzhou will be the pilot for financial reforms that will allow local residents to set up loan companies and signal that crucial, though complicated, reform of the financial market is on the way.
Wen hit the nail on the head when he said it had been "too easy" for the banks to generate profits and too difficult for people to borrow money. So breaking the banks monopoly is the cucial starting point for reform as it will help relieve the heavy burden on those smaller enterprises seeking financial support.
However, there are many problems in the financial market that need to be solved, such as the marketization of interests rates and the regulating of private capital.
Although the private economy is recognized as one of the largest contributors to China's GDP and a creator of jobs, Chinese banks have long been parsimonious with the financial services and support they offer small and medium-sized enterprises.
Now is a good opportunity to reform the financial sector, because the banks are now enjoying a golden age in terms of their profits and expansion momentum.
Ending the banks' monopoly and opening-up the financial market are essential for successfully transforming China's economic structure.
Yet even more important than central authorities' unified thought is the need for a tangible and far-sighted action plan to implement financial reform with risk management and their damages on national economy controlled.
After private capital floods into the financial sector, the money supply shortage will probably be solved. The most urgent task for the authorities at that time will be to supervise and optimize the allocation of financial resources through rational measures.