Financial reform

Why it's important

The newly-opened Shanghai Free Trade Zone (FTZ) created some excitement as it was billed as a testing ground for broader financial freedom.

The much-debated calls for looser financial controls are gaining momentum as the Chinese economy's slowing growth rate raised expectations the world's second biggest economy can sustain its growth by facilitating its real economy.

Small and medium enterprises (SMEs) have been ill-funded, given that bank lending favored State-owned enterprises. Bank lending also leaned toward real estate-related companies and local government funded projects.

What to expect

Well-flagged expectations include the possible removal of caps on deposit rates, which are still fixed by the central bank, after China allowed banks to decide their own lending rates in July.

Specific measures are awaited to make Shanghai FTZ a vanguard to internationalize the yuan and open up capital flow.

China should develop small-sized banks and financial institutions which specialize in SMEs' financing, according to Zhang Monan, a researcher from China Center of International Economic Exchanges.