China Market Perspectives - 78 Pages

Deepening financial reforms in 2014

We expect China to deepen  financial reforms in 2014. Major reforms and
liberalization  of  China’s financial sector will include the opening up of the
banking sector to private investment, issuance of local government bonds
and the  development of securitization products, interest rate liberalization,
and  capital  account  liberalization.  We  assess  the  impact  of  financial
reforms on banks.

2014  will  mark  the  beginning  of  a  series  of  growth-enhancing  structural
reforms and should witness a cyclical economic recovery. We expect GDP
growth  to  continue  its  recovery  on  the  back  of  five  major  drivers:  1)
reduced  overcapacity;  2)  deregulation  in  sectors  with  under-capacity;  3)
the effectiveness of the government’s efforts to “reactivate money stock”;
4) rising external demand; and 5) a pro-cyclical fiscal policy.