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Policy Brief - How they did it Vol. 1 Issue 4 - China’s Financial Mechanisms for Industrial Development
The paper starts from the comparison between China and other developing economies and gives a rough overview of China’s financial mechanisms in industrial development from a systematic perspective. Since the beginning of reform and opening up of the financial system, China’s industrial development has taken great strides in expansion, diversification, transformation, and upgrade of its industries. This resulted from the interaction of multiple factors, in particular, the financial factor. China’s financial system has grown rapidly and maintained its stability during a long term, because of the implementation of financial restraint and “online balance sheet repair” strategies. Such stable growth provides the basic precondition for the financial sector to support industrial development. As for financial support to specific industries, the financing for the manufacturing industry mainly relies on the increase of the collateral value, which can cover the risks of loss on the loans; the financing for the Internet industry is mainly from the overseas stock market. The Chinese mode can provide some inspiration to Africa, but this should be through a dialectical understanding in order to distinguish China’s experience from its lessons learned.
Keywords: Financial restraint, financial repression, online balance sheet repair, collateral.