China’s financial globalisation has been a significant and evolving process, marked by various policy initiatives and economic developments. China introduced various policies for financial globalisation. It began its globalisation efforts in the late 19th century and early 20th century.

China’s globalisation policies are rooted in a combination of economic, strategic and geopolitical considerations. The rationale behind these policies have evolved over time, reflecting the changing dynamics of the global economy and China’s own development points.

Policy initiatives and economic developments of China:-

Internationalisation of the Renminbi:- China has made substantial efforts to promote the international use of its currency, the Renminbi. This encourages the role of the Renminbi in international trades.

Belt and Road Initiative:- The BRI, launched by China, plays a vital role in the financial globalisation. China has been involved in financial infrastructure projects across Asia, contributing to increased financial linkages with partner countries.

Outbound Investments:- Chinese companies have been increasingly involved in outbound investments, that includes investments in foreign companies, real estate, and financial assets.

International Expansion of Chinese Financial Institutions:- Major Chinese banks have expanded their presence globally. They operate in various financial hubs and provide financial services to international clients, contributing to China’s influence in global financial markets.

Financial Regulatory Reforms:- China has undertaken regulatory reforms to align its financial systems with international standards. These reforms enhance transparency, risk management, and regulatory cooperation, facilitating China’s integration into the global financial systems.

Global Financial Governance:- China has increased its participation in international financial institutions, including the International Monetary Fund and the World Bank. It has advocated for reforms in these institutions to reflect the changing global economic landscape.

Opening of Stock and Bond Markets:- China has taken steps to open up its domestic stock and bond markets to foreign investors. This includes the inclusion of Chinese-A shares.

Fintech Innovation:- China is a global leader in financial technology innovation. The companies in China play a significant role in shaping digital payment systems, blockchain technology and other financial innovations.

Cross-border Capital Flows and Controls:- Through a combination of methods of liberalisation and capital controls, China has managed its cross-border capitals.

Sustainable Finance:- China has an interest in sustainable finance and environment, social and governance considerations.

Timeline of the financial globalisation of China:-

● 1978- Beginning of Economic Reforms:- China initiated economic reforms under Deng Xiaoping, moving away from a centrally planned economy. These reforms laid the foundation for increased economic openness.

● 1992- Establishing the Shanghai Stock Exchange:- China established the Shanghai Stock Exchange in 1990, officially opening for trading in 1992. This marked a significant step toward integrating China into global financial markets.

● 2001- Joining the World Health Organization:- China’s accession to the World Trade Organization in 2001 facilitated increased trade and economic interactions with other member countries, setting the stage for financial globalisation.

● 2002- Launch of Qualified Foreign Institutional Investor Program:- The QFI Program was launched, allowing licensed foreign investors to trade in China’s A-share stock markets. This was a key move to attract foreign capital and expertise.

● 2009- Introduction of Qualified Domestic Institutional Investors Program:- China introduced the QDII Program, enabling domestic institutional investors to invest in overseas financial markets. This marked a significant step toward allowing Chinese capital to flow globally.

● 2013- Launch of Shanghai- Hong Kong Stock Connect:- The Shanghai- Hong Kong Stock Connect Program was established, allowing international investors to trade Shanghai-listed A-shares directly. This increased foreign access to China’s stock market.

● 2013- Belt and Road Initiative:- The Belt and Road Initiative has been a key driver of China’s financial globalisation. It involves significant investments in infrastructure projects across Asia, Africa, and Europe.

● 2015- Renminbi Inclusion in IMF’s Special Drawing Rights Basket:- The International Monetary Fund included the Chinese Renminbi in its Special Drawing Rights basket of currencies, recognizing it as a global reserve currency.

● 2016- Bond Connect and Further Stock Connect Initiatives:- China launched Bond Connect, allowing foreign investors to trade in the Chinese Bond Market. Additionally, further Stock Connect initiatives were introduced, linking stock exchanges in Shanghai and Shenzhen with those in Hong Kong.

● 2018- Opening Financial Sector to Foreign Ownership:- China announced plans to gradually open up its financial sector, including banking, insurance, and securities, to higher levels of foreign ownership. This move aimed to attract more foreign investment and expertise.

Impacts of US-China Trade Relations on Financial Globalisations:-

Trade tensions between the US and China can influence the value and stability of their respective currencies. Currency fluctuations can affect global financial markets, trade balances, and investment strategies. The

Escalating trade tensions may lead to shifts in investor sentiment, impacting capital flows between the US and China.

Increased uncertainty can prompt investors to reassess their portfolios, affecting global financial markets. 

Trade tensions can contribute to heightened volatility in financial markets, impacting equities, bonds and currencies. Trade disputes can disrupt global supply chains, affecting multinational corporations and their financial performance. Trade tensions may influence the investment patterns of companies and investors between the US and China. Changes in investment strategies can have ripple effects on global capital flows and financial markets.

Responses to trade tensions by monetary authorities and policymakers in the US and China can impact interest rates, liquidity, and financial regulations.Trade tensions can affect the operations and performance of financial institutions with exposure to US- China Trade. Financial institutions may reassess risk management strategies in response to changing economic conditions.

Trade tensions may influence the role and effectiveness of multilateral financial institutions such as the International Monetary Fund in managing global economic stability. These institutions may be called upon to provide support and guidance during periods of heightened uncertainty.

Trade tendons between the US and China can have broader implications for global economic growth. Financial markets react to assessments of how trade disputes may impact the overall health of the global economy. Prolonged trade tensions can lead to structural changes in global trade patterns, economic alliances, and financial regulations. These changes can reshape the landscape of financial globalisation over the long term.

In conclusion, China’s financial globalisation is a complex and ongoing process, influenced by domestic policy decisions, global economic trends, and geopolitical dynamics. Researchers often delve into specific aspects of this process to gain a deeper understanding of its implications and challenges.