China And Vietnam In A Comparative Analysis Of Financial Deepening

China and Vietnam in a comparative analysis of Financial DeepeningThe theory of financial deepening is for financial repression (Financial Repression) 20 Century 70's from the McKinnon and Shaw on the actual situation of developing countries at that time depth of their argument. Theory of financial deepening is the core of financial liberalization (Financial Liberalization). Jean-Pierre Landau, financial inspectors, Association of French bank in the "Financial Liberalization and Financial Security" seminar on Jan.10,2001, the Vietnamese capital Hanoi released financial liberalization is the elimination of the credit amount, distribution restrictions and interventions. Exchange rate mechanism to replace the number of credit regulation. Liberalization of the financial institutions have the power to decide interest rates on deposits, lending rates, free use of the interest rate tool. In theory, liberalization lead to the termination of interest rate cap, as well as fund-raising restrictions on its use, there is no preferential funding mechanisms. Liberalization means to expand the activities of financial intermediaries, the competitiveness of a country to eliminate legal discrimination between economic sectors. Nevertheless, financial liberalization does not mean there is not any interference or financial activity monitoring. In addition, financial liberalization, the need to strengthen infrastructure management and oversight bodies. In order to maintain effective financial and banking markets overall operational needs of a reasonable intervention. Financial liberalization depends on the circumstances of each country, which includes reflecting the weakness of the different factors of each country. In general, there are the five most important factors, including interest rate liberalization, liberalization and reduction of credit activities, the administrative procedures for national credit institutions, exchange-rate management system, financial institutions, the liberalization of financial markets activities, reduce the financial markets of countries taxation, fiscal deficits and inflation.1997 Asian financial crisis, many scholars believe that the reasons are a result of financial liberalization, however, well-known U.S. research institutions-the Heritage Foundation published the "1999 Index of Economic Freedom" that caused a major financial crisis factor is not the cause of financial liberalization but too much government intervention, economic freedom caused by still insufficient. Opening of the market crisis is not too much too fast but because of government corruption, currency manipulation, financial institutions, instability, lack of legal and other factors. As published on McKinnon:"appropriate monetary policy can not guarantee there will be appropriate to ensure a country's industrial growth rate, but the inappropriate development of monetary policy will certainly have difficulties." McKinnon and Shaw believe that financial deepening means that when the financial sector to effectively mobilize and distribution of social capital to promote economic development, economic development and increased financial needs and stimulate financial sector development, financial and economic development will form a mutually reinforcing and mutually promote the virtuous circle of the state. Deregulation of financial deepening in itself just, but also to the timing issue, McKinnon, "the order of market economy", the Shanghai Joint Publishing,1997 translated edition, p.273 said:only in domestic borrowing by a balanced interest rates freely, domestic inflation under control, until the continuing decline in the exchange rate is no longer necessary to allow the free flow of international capital available for arbitrage conditions be considered.China and Vietnam's financial liberalization on financial system reform, to achieve the financial system from a planned economy to market economy changes. Financial reform in developing countries, including radical and progressive options such as two roads, while China and Vietnam, the choices are way too incremental, that the planned economic system and market-oriented economic reforms in co-existence of, and gradually the old infiltration system reform, the introduction of market forces to replace the old economic system to develop a new economic system. Although the progressive measures taken to carry out financial liberalization slower but can avoid the process of financial liberalization to promote the financial risks faced by the reform achieved remarkable results, with good results. China and Vietnam's status in developing countries to learn from experience is rapidly onto the international economy with world economy on the road. In fact, the process of financial liberalization has brought a lot of interest in addition to or cause a lot of the risk of financial instability, inevitably a threat to economic security. Although the process of implementation of financial, financial risk is inevitable, but China and Vietnam already has a mature financial market, a stable macroeconomic environment, a prerequisite. China and Vietnam through the practice of financial liberalization process and its results were discussed and a simple comparison.This article is divided into five chapters. The first chapter is the introduction part, first introduced the topics of this paper the background and significance, the trend of financial liberalization, and financial risk is faced by all countries, especially developing countries, an important issue. Second, the overall summary of financial deepening and related literature review, mainly to McKinnon and Shaw's financial deepening of the core, introduced in the McKinnon and Shaw on the basis of financial deepening on the number of successors. This chapter in chronological review of the financial deepening of the international academic research. Finally, the research methods used in this paper, the paper structure and paper innovations and shortcomings. ChapterⅡfocuses on the process of financial deepening in developing countries and the risk theory. Developing incremental and radical type, and so in two ways, which is developing gradual process of financial deepening in achieving the optimal choice. At the same time, analysis of the implementation process of financial deepening in developing countries face the risk theory. Chapter on China and Vietnam to analyze the process of financial liberalization. Process of financial deepening in China mainly for the interest rate reform, liberalization of the banking system, capital account liberalization and so on. Viet Nam, focusing on interest rate liberalization, financial liberalization and exchange rate reform. Chapter from Vietnam compared the current situation of financial deepening and exploration, made in China and Vietnam in the implementation process of financial deepening similarities and differences. ChapterⅤConclusions and policy recommendations, from the financial deepening of China and Vietnam to the theory and practice of financial liberalization draw conclusions and put forward the best policy.