Analysis on the Obstacles for China to Become a Financial Superpower

Economics, Simon Fraser University, Burnaby, BC, Canada

Abstract

This study draws the following conclusion through the analysis method of literature review. At present, the most important factor that hinders China becoming a financial superpower is the increase of the control of capital outflow, what will weaken the trust between the capital outflow country and foreign investors, and destroy the relationship established by the country on the international platform. In addition, China’s aging population increases the huge debt increase is also the reason why it is difficult to becomes a financial superpower. This paper puts forward some remedial measures for these challenges. One way is one belt and one road initiative to reduce state control of capital and regulate the monetary system. These actions will help China compete with other developed countries as a financial superpower. There are three reasons for this conclusion. Firstly, when compared to other global superpowers like the United States and the United Kingdom, China is still lagging behind in terms of its GDP. Moreover, the state has monopolized a lot of financial decisions in the country such as capital outflows and therefore curbing economic growth. Thirdly, the State control has spilled over to the foreign exchange market and the country has been known to limit its currency lending capacity. Therefore, the internalization of their currency has halted.