The Research On The Relationship Between Liberalization Of The Financial Services Trade And Financial Stability

December 11th,2006 is the fifth anniversary of China's accession to WTO. The opening of financial services has experienced almost 3 important sections, the early stage of allowing foreign financial institutions existing in China, the international phase, and the integration phase of financial globalization. Great changes have taken place deeply and broadly in the opening of financial services. The liberalization of financial services trade is bringing to China such opportunities, including the following:at a higher level of quality to improve the function and the development of the financial system, to promote and deepen the reformation of Chinese financial system, helpful for Chinese financial institutions to learn foreign advanced management experience, change management mechanism, and strengthen internal management to enhance their own competitiveness.At the same time, the liberalization financial services trade also has brought serious challenges:leading the decline of the market share and profit the Chinese financial institutions have, the macro-control and financial supervision have much greater difficulties.It is the situation of both opportunities and challenges that makes us have to think about how to take good use of the privileges the liberalization of financial services trade, while avoiding its attendant risks.The liberalization of financial services trade influences the financial stability through in 3 different ways:international capital flows, financial regulators and the efficiency of financial institutions.First of all, liberalization financial services trade has an impact on the financial stability by the capital flows, on one hand different forms of financial services trade have different affects on international capital flows;on the other, the impact of different forms of capital flows is also different to the financial stability; besides,volatility of capital flows causes influence to the financial stability. Second, liberalization of financial services trade sets challenges to financial regulation in 4 areas of universal banking, regulatory skills, and financial innovation and globalization challenges.Third, liberalization of trade in financial services brings competitive effect and the spillover effects on financial stability.At present, China's financial industry is at an important historical turning point and an important period of development. With the development of economic and financial globalization, the expanding capital flows and ever-changing financial innovation and ever-changing bring significantly increasing financial uncertainty. On one hand we are to fulfill WTO commitments,stick to the liberalization process,and continue to comply with the relevant provisions of WTO;on the other hand, according to national conditions and formulate correct strategies of financial services liberalization----initiative, controllable and gradual progress combined----hould be made according to our national conditions.We are not only competing with foreign financial institutions but also cooperating, and hope to achieve mutual benefit and win-win situation.