Towards Financial Superpower provides an institutional account of China’s financial system and aims to assess whether China will emerge as the next financial superpower. Lerong Lu does an excellent job explaining the institutions of China’s financial system, and the volume is rich with examples that demonstrate the role of the central government in modern finance. The book, however, is less convincing in how it connects this institutional setting to the rise of China in global finance. The core argument is that China will become a financial superpower because it has a capable and powerful government that will design the necessary policies to make it so.
The book is particularly valuable in helping readers understand the unique role of the central government in China’s financial system. Lu notes that the financial sector is “the lifeblood of a nation’s economy” (p. 4), and that financial safety is closely tied to national security (p. 35). Due to the strategic role of the financial industry, “the ruling party and government are unwilling to relinquish their control over banking and finance” (p. 14), and furthermore, “… as a socialist regime, the Chinese government has a special responsibility to safeguard people’s financial interests” (p. 15). The volume clearly shows that the government’s objective is to achieve efficient allocation subject to the constraint of financial and social stability. This articulation of both the government’s objectives and its administrative capacity is one of the book’s main strengths, and it helps explain features of China’s system that are often missing from other accounts.
A key conceptual issue arises in how the author defines “efficiency.” The term is used in a way that is more consistent with government policy discourse than with its standard economic meaning. For example, Lu argues that “the central bank [can] direct funds to specific sectors they deem vital for economic development, ensuring the efficient functioning of credit markets” (p. 74). This approach implicitly assumes both that market failures are significant and that government intervention improves outcomes, yet it is often empirically difficult to evaluate either claim. As a result, the concept of efficiency in this book aligns more closely with the policy slogan “efficient markets and a capable government” (youxiao shichang, youwei zhengfu), in which markets allocate resources and the state intervenes to ensure stability and guide outcomes.
A similar issue arises in the book’s central claim about China becoming a financial superpower. Lu argues that the central government’s power and commitment to stability will allow China to achieve this goal. I agree that China will likely become a financial superpower, but the book does not fully explain the mechanisms through which this would be achieved. The analysis focuses heavily on domestic institutions but does not sufficiently examine how these institutions interact with the external environment. In particular, the international economics literature has identified two major challenges: capital controls and a lack of global trust.
On capital controls, Lu suggests that the Stock Connect programmes can provide sufficient access and liquidity for global investors. However, expanding these programmes would likely bring in a large volume of foreign capital, which could make it more difficult for the government to maintain domestic stability. In other words, increasing openness may conflict with the government’s core objective of maintaining control. It is therefore not clear how China can simultaneously provide deep liquidity to global investors while preserving and ensuring domestic financial stability.
Regarding the issue of trust, the book implicitly assumes that global investors will have confidence in the government’s commitment to stability. However, commitment is a fundamental challenge for any autocratic system. While the government may have strong incentives to maintain stability for its people, foreign investors lie outside this political relationship, and it is not clear that the same mechanisms that sustain domestic credibility extend to international investors. Understanding why global investors would trust the Chinese government is therefore central to any explanation of how China can become a financial superpower.
In terms of methodology, the book primarily uses policy documents, regulatory texts and secondary sources to construct an institutional account of China’s financial system. This approach is effective in providing an overview of official thinking and regulatory design. However, it does not provide a sufficient basis for evaluating whether the government will achieve the outcomes the author predicts.
The book makes a useful contribution to the field of Chinese studies by clearly articulating how the Chinese government uses its administrative power to shape and reform the financial system. It brings together a wide range of examples to synthesize this perspective. It will be particularly helpful for students and scholars seeking an introduction to China’s financial system from within its own institutional and intellectual framework. It offers insights into how Chinese policymakers and scholars conceptualize the relationship between markets and the state, and it provides a clear contrast with Western approaches.
Overall, Towards Financial Superpower provides valuable insights into the role of the government in China’s financial system. While I agree that China’s socialist market economy can likely support the emergence of a financial superpower, the book does not fully explain how China’s institutions will satisfy the core concerns of global investors. For readers looking to understand China’s financial system from within, this book is a very helpful place to start.
