But the path of Australia and other countries that have pursued financial reform and capital account liberalisation at the same time, nearly all of whom then experienced episodes of financial instability, suggests that it can be beneficial to establish a strong prudential supervision framework before the financial sector and capital account are fully liberalised. This mitigates subsequent risks to financial stability.
In light of this history, and given the importance of China to the global economy, China’s authorities have good reason to continue pursuing a cautious and gradual program of financial reform. Conclusion Let me conclude. Australia has a deep interest in following the ongoing liberalisation of China’s financial markets and internationalisation of the RMB, given the strong linkages between the two economies.