Analysis Of The Regulation In The Evolution Of China’s Financial Business Model

The period from the rise of financial liberalization in the1970s to the U.S. subprime mortgage crisis in2007, national financial industry has undergone tremendous change. Britain, Japan and the United States have changed from the original sub-industry business model to mixed management; China has also experienced a process of consolidation in the financial sector to sub-sector of the industry mix changes, and gradually established a "three sectors in one industry" sub-sector regulatory system. The crisis has not changed American mixed management like the last "Great Depression", but has promoted the mergers and acquisitions among financial institutions. Against the backdrop of mixed development of the global financial industry, China’s financial industry sub-sector business development model is difficult to adapt to global competition under open conditions.This paper focuses on the internal logic relationship between the development of the change in the business model of the financial sector and financial regulation. First, by introducing the relationship between financial development and economic development, it illustrates that the financial development and economic development have reinforcing effect on each other; if financial development and the real economy deviates, it will bring financial disorder and even economic disorder. Then by comparing and analyzing the real-world conditions of the world’s financial business model transformation, it provides alternative development path for our integrated business development. Whether it is mixed or separate operation, its impact on the financial order will be subject to fluctuations in the economic cycle. With good momentum of economic development, the financial system, for the pursuit of efficiency, continually carries out financial and organizational innovation, and the corresponding financial regulation also makes alterations to meet the development requirements of the financial system; however, with a sharp decline in economic momentum, the financial industry may suffer instability or even a crisis due to deregulation in rising periods. So the transformation of the operating mode must correspond to the auxiliary mode of regulation and regulatory regimes. The development and change of financial supervision around the world are mainly based on certain countries’ own economic and legal systems. With the increasingly evident trend of mixed economy, how to build a business model suited to China’s national conditions is a practical problem most urgent to be resolved, In order to ensure a smooth transition of transformation of the financial system and the control of financial risks, the choice of the business model should be conducive to the country’s effective control of the financial order in the process of financial liberalization. Appropriate regulatory approach will help to keep proper balance between efficiency and safety in the financial development process, but the current regulatory system is not adapted to changing needs of the business model. This paper attempts to compare and contrast regulatory models of some countries, in order to find the appropriate regulatory counter policy of China.As to the maintenance of financial order, the paper proposes "character" hypothesis and through the "character" explains that deviant action of individuals influences the stability of the collective order."Character" hypothesis is based on the joint action of being "selfish" and "altruistic". The "character" chooses the most appropriate course of action by adjusting the satisfaction of the individual. When the "character’s" action deviates too much, it will affect the stability of the collective order, thereby affecting the collective functions and properties. Collective has to establish appropriate rules and norms concerning punishment or "soft constraints" education to change the "character’s" behavior choices, thereby enabling collective action to obtain effective protection and stability. Then "character" hypothesis is introduced into the financial system; by presenting conflicting selection of "characters", the paper explains deviation from efficiency and safety will bring instability or crisis to financial order. So, the key is to maintain financial stability from both inside and outside of the financial system. Financial regulators maintain financial order by external constraints for financial stability and erect a "wall of oversight", but in a good external condition for economic growth, efficiency is chased by institutional pressures, and regulators would begin to relax. And when the economic situation worsens, regulatory changes can not keep up the momentum of the economy due to adjustments, some high-risk products and operators will become the fuse, and then bring the whole financial system crisis. By "character" hypothetic analysis, the paper proposes to strengthen financial external supervision, to improve internal control of financial institutions, and to establish effective incentive system of financial supervision and security.