On College of Financial Liberalization: Class: Student: Student Number: Abstract: Entering the 2 1 century, it is already an era of economic globalization, and the new term of financial liberalization is gradually understood by people. What is financial liberalization? What are the advantages and disadvantages of financial liberalization? And what is the development of financial liberalization in China? Let's discuss it one by one. Keywords: financial liberalization, our world has been integrated into a whole, and culture, economy, politics and so on are more or less linked with countries and regions around the world. Financial liberalization runs through the world economic and financial development. Financial liberalization was first put forward by American economists Ronald R.J.Mckinnon and E.S.Show in the 1970s in view of the incomplete financial market, the serious distortion of capital market and the government's "intervention syndrome" affecting economic development. Financial liberalization, also known as "financial deepening", is the symmetry of "financial repression". The theory of financial liberalization advocates reforming the financial system, reforming the government's excessive intervention in finance, relaxing the restrictions on financial institutions and financial markets, strengthening the domestic fund-raising function to change the excessive dependence on foreign capital, relaxing the control on interest rates and exchange rates to make them market-oriented, making interest rates reflect the supply and demand of funds and exchange rates reflect the supply and demand of foreign exchange, promoting the improvement of domestic savings rate, and finally achieving the goal of curbing inflation and stimulating economic growth. After two epoch-making revolutions, financial liberalization has developed and the economy has increased. On the other hand, financial liberalization has aggravated financial fragility, and the crisis caused by financial fragility has promoted economic recession, which is the duality of financial liberalization. This leads to the advantages and disadvantages of economic liberalization. Advantages of financial liberalization Advantages of financial liberalization: First, financial liberalization has undoubtedly enhanced the competitiveness of the financial market, improved the efficiency of the world financial market and promoted the development of the world banking industry. Financial liberalization not only creates pressure, but also provides opportunities for all financial market participants, whether borrowers or lenders, making it possible and necessary for them to reduce costs or increase profits. Second, it is generally believed that under the condition of financial liberalization, financial information is more open, which can reflect the relationship between supply and demand in the market more accurately and quickly, that is, the scarcity of funds, and form a more effective price signal system. More importantly, financial liberalization has reduced the obstacles of capital flow between products and banks, thus making the allocation of resources closer to optimization. Third, financial liberalization has provided more profit opportunities for financial enterprises. On the one hand, financial liberalization has greatly promoted the formation of financial capital and provided a broader space for financial enterprises; On the other hand, the gradual dissolution of the separate operation system provides financial enterprises (especially commercial banks) with more flexible management means. Fourth, financial liberalization, especially the gradual lifting of the separate operation system, provides conditions and means for commercial banks to choose a balance between profitability and security. The establishment of separate management system was originally focused on the safety of commercial banks. However, under the traditional separate operation system, due to the lack of management means on the one hand and the competition from domestic and foreign counterparts on the other hand, the security has not been really guaranteed, and bank bankruptcies have emerged constantly. After the gradual dissolution of the separate operation system, the means of operation of commercial banks have greatly increased, which may reasonably match high-risk and high-yield products with low-risk and low-yield products, thus freeing commercial banks from their original predicament. Fifth, financial liberalization has promoted global financial integration. As countries increasingly open their own financial markets, the speed of capital flow is accelerating. Regardless of the time zone division, the world financial market should be said to have taken shape. The liberalization of capital flow has improved the distribution of resources around the world. Disadvantages of financial liberalization: Disadvantages of financial liberalization: First, while financial liberalization improves the efficiency of some aspects of the financial market, it also reduces the efficiency of other aspects of the financial market. For example, the integration of financial markets and the emergence of numerous financial innovation structures have reduced the transparency of financial markets. Faced with extremely complex derivatives, bank customers can only listen to the bank's advice, thus reducing the enthusiasm of banks to improve efficiency. In addition, the expansion of financial market capacity has brought opportunities to banks, but also weakened the pressure on banks to reduce costs and increase efficiency. Second, the motivation of banks to commit themselves to financial innovation has dropped significantly. Under the condition of strict financial control, financial institutions (especially commercial banks) are forced to constantly introduce new financial products to bypass financial control and enhance their competitive strength. Today, financial liberalization has become a climate, and when interest rates and exchange rates are generally liberalized around the world, the barriers to separate operations have been basically eliminated, and the necessity of financial innovation is no longer so prominent. In recent years, the momentum of financial innovation has slowed down, and the proportion of traditional business has gradually picked up. This is the root cause. Third, the most obvious and least controversial thing is that financial liberalization has increased the risks of customers and the financial industry itself. The deregulation of interest rates and exchange rates has led to a sharp increase in market volatility. After the lifting of the separate operation system and the implementation of the all-round operation of commercial banks, commercial banks have set foot in a large number of high-risk business areas, and their risk assets have increased substantially. The reduction of capital flow obstacles and the increasing opening of financial markets in various countries have accelerated the international capital flow. Although, in theory, smoother capital flow contributes to the optimal allocation of resources, under the "semi-perfect" market conditions, the impact of hot money sometimes causes great harm. Fourth, after financial liberalization, the links among banks, commercial banks, non-bank financial institutions and financial markets in various countries have become closer, and the danger that the financial crisis of a single enterprise will affect the stability of the financial system has increased. Fifth, because bank customers are helpless in the face of extremely complex derivatives, they can only follow the advice of banks, which leads to frequent bank employee fraud cases. At the same time, under the condition of intensified competition, in order to pursue efficiency, banks tend to ignore risks and pursue profits, relax customer review, increase customer default rate, and bank fraud is also common. Sixth, after the implementation of financial liberalization, although commercial banks have gained more profit opportunities, the loss of monopoly position and the intensification of competition have led to the decline of commercial banks' profit margins. All these circumstances show that financial liberalization is by no means beneficial. While financial liberalization improves the efficiency of financial markets, it often reduces the efficiency of financial markets in other aspects; Financial liberalization can not be idealized, because it provides financial tools to improve security, but also increases risks. Even in western countries where the financial system is quite perfect, financial liberalization is a choice after weighing interests, and sometimes even a last resort. In fact, at any time, in any financial system, the reform of the financial system is bound to be intertwined with advantages and disadvantages. Policymakers can only expect that the advantages outweigh the disadvantages, not a choice that the advantages outweigh the disadvantages. The process of global financial liberalization in parallel with China's financial system reform in the past decade has also proved this point. No matter in countries with developed financial markets or countries with underdeveloped financial markets, the only way out is to objectively evaluate the advantages and disadvantages of each specific measure with a positive and prudent attitude, weigh the interests and boldly promote the reform of the financial system. The choices faced by China's financial specialization: First, financial liberalization has improved the efficiency of the financial market in some ways. But in other ways, it also has the effect of reducing the efficiency of financial markets. For example. The integration of financial markets, numerous financial innovations and the emergence of a large number of financial institutions have reduced the transparency of financial markets. Faced with extremely complex derivatives, bank customers can only listen to the bank's advice, thus reducing the enthusiasm of banks to improve efficiency. In addition, the expansion of financial market capacity has brought opportunities to banks, but also weakened the pressure on banks to reduce costs and increase efficiency. Second, the motivation of banks to commit themselves to financial innovation has dropped significantly. Under the condition of strict financial control, financial institutions (especially commercial banks) are forced to constantly introduce new financial products to bypass financial control and enhance their competitive strength. Today, financial liberalization has become a climate, and interest rates and exchange rates around the world are generally liberalized. The barriers to separate management have been basically eliminated. The necessity of financial innovation is no longer so prominent. In recent years, the momentum of financial innovation has slowed down, which is the reason why the proportion of traditional business has gradually increased. Third, the most obvious and least controversial. Financial liberalization has increased the risks of customers and the financial industry itself. The deregulation of interest rates and exchange rates has led to a sharp increase in market volatility. After the lifting of the separate operation system and the implementation of the all-round operation of commercial banks, commercial banks have set foot in a large number of high-risk business areas, and their risk assets have increased substantially. The reduction of capital flow obstacles and the increasing opening of financial markets in various countries have accelerated the international capital flow. Although, in theory, smoother capital flow contributes to the optimal allocation of resources, under the "semi-perfect" market conditions, the impact of hot money sometimes causes great harm. Fourth, after financial liberalization, the links among banks, commercial banks, non-bank financial institutions and financial markets in various countries have become closer, and the danger that the financial crisis of a single enterprise will affect the stability of the financial system has increased. Fifth, because bank customers are at a loss in the face of extremely complex derivatives, they can only follow the advice of banks. The resulting bank employee fraud cases frequently appear. At the same time, in the case of intensified competition, in order to pursue efficiency. Banks tend to ignore risks and pursue profits, relax customer review, increase customer default rate, and bank fraud is common. Sixth, after financial liberalization. Although commercial banks have gained more profit opportunities, the loss of monopoly position and the intensification of competition have led to the decline of commercial banks' profit margins. From this, we have a deeper understanding of economic liberalization. As a double-edged sword, how to use it correctly and develop ourselves still needs our constant exploration and efforts. The dilemma of financial liberalization faced by our country is only temporary, which requires us to constantly understand it and formulate policies and strategies correctly, so that the road of financial development in our country will be broader and brighter. References: The Impact of Financial Liberalization on China's Financial Industry 2005-12-24 "Financial Trends in the 20th Century-Financial Liberalization" Ma 1999 Yang,.