Reluctant Regulators - How the West Created and How China by Leo F. Goodstadt

By Leo F. Goodstadt

The 2007-09 monetary predicament used to be predictable and avoidable yet American and British regulators selected to not interfere. They didn't enforece laws or enforce their very own regulations due to an Anglo-American 'regulatory tradition' of non-intervention that got here to dominate monetary rules around the globe. Hong Kong - the overseas monetary centre of an more and more wealthy China - defied global opinion and made balance its precedence, even the place that intended broad govt intervention. This coverage ensured Hong Kong's strong functionality intvention. This coverage ensured Hong Kong's powerful functionality in the course of the 1997-8 Asian monetary challenge and the worldwide trouble. extra considerably, it made attainable Hong Kong's notable contributions to financing China's fiscal take-off and to the modernisation of its monetary institutions.

Reluctant Regulators is a scathing indictment of regulatory inertia within the West. It presents very important and unique insights into the motives of monetary crises and can pay detailed consciousness to China's makes an attempt at reform and Hong Kong's position in China's monetary modernisation. The ebook may be of curiosity to pros in monetary companies, to policy-maker, and to students and scholars in economics, political technology and monetary history.

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Sample text

73 Throughout this book, ‘culture’ is used as shorthand for a shared outlook or set of attitudes. It is a term of convenience that avoids the baggage that might come with references to the ‘political’ or ‘ideological’. Ideally, quotation marks should be employed to warn that the word is not used in a precise, technical sense, but it appears too frequently for this safeguard to be practical. ‘Regulatory culture’ is intended to convey the values and attitudes which financial officials share in common across national frontiers and which shape their policies and their practices.

57 China’s financial regulators can never escape from this ‘invisible hand’, which reduces their capacity to perform effectively. Especially damaging have been the losses which the banks were forced to incur because ‘policy’ and ‘relationship’ lending remained rife. The banks have been compelled to provide credit to enterprises in obedience to state directives regardless of the borrowers’ creditworthiness, the People’s Bank has complained. 58 As a result, China offers considerable evidence that financial liberalisation without professional and independent regulators is a prescription for financial instability.

Although China’s reform process was to be complex, confused and often chaotic, the retreat from central planning and state controls was accompanied by 30 years of high-speed GDP growth during which the barriers to foreign trade and investment were dismantled. Along with these innovations came a repudiation of the Maoist era’s ‘self reliance’ and other protectionist policies and a new-found sense of common challenges and shared solutions in China’s relations with the rest of the world. Attitudes emerged in China that were very close to the consensus described earlier in this ‘Introduction’, which had led to liberalisation of financial markets worldwide and to the light-touch Anglo-American regulatory culture that became almost universal.

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