Xi Jinping on the Chinese Financial System

The Chinese journal Qiushi, the Communist Party of China’s Central Committee Bimonthly, has published in its third 2026 edition “Take the road of financial development with Chinese characteristics and build a financial power,” which as it says in an endnote “is an excerpt from General Secretary Xi Jinping's speech at the seminar on promoting high-quality financial development by major leading cadres at the provincial and ministerial levels on January 16, 2024,” which makes it two-years old. The obvious question is why now? The answer appears to be connected to the implementation of the 15th 5-Year Plan which is being rolled-out today as this report by Global Times documents. A salient fact about the self-described Marxists and Marxist-Leninists of the Soviet Union and China was revealed at the very end of a podcast featuring Michal Hudson and Vijay Prashad—Hudson:

I had spent a year of my life studying Marx’s theories of surplus value. At the beginning, only volume one was translated. Russia fought against its being translated, and the Communist Party actually destroyed the printer’s plates for volume two because it was so upsetting. Same thing in China. They’re not very happy at all to hear discussions of volumes two and three of Capital.

That prompted me to ask Dr. Hudson at his Patreon page if he would explain further. Here’s what he shared:

It's a long story. One dimension is that the Stalinists only focused on Vol. I: industrial employers exploit labor. The other is the confusion of Stalinists (incl Maurice Dobbs) between price and value. For China, they already kept money as a public utility. But they did not tax land or distinguish between economic rent (unearned income) and value, with Rent = Price - Value. They simply rejected Marxism as tainted by Stalinist bureaucracy and avoided studying Marx's Vol II and III since 1980 under Deng. Their universities give priority to Chinese students who have studied economics in the United States and simply have been neoliberalized.

So, we can conclude that the self-described Marxists weren’t very Marxist since they rejected Marx’s most important tracts. IMO, this revelation is very important for both historical and contemporary reasons. Dr. Hudson knows China well as he often taught courses there and has a series of them in video format. But exploring this isn’t the aim; rather, it’s purpose is to show what Xi prescribes is a hybrid that blends traditional Chinese philosophy with Marxist and other Western political-economic thought. It should also be noted that many elements of what follows are incorporated into China’s various Global Initiatives and into its developmental philosophy for the Belt & Road and also finds its way into bilateral trade agreements.

Another reason why Xi’s speech was delayed publication for two years is China’s own development, particularly its performance in winning the Trade War initiated by Trump in 2025 that saw its correct anticipation of Trump’s actions and the methods taken to avoid them while generating a record Yuan valuated amount of exports. Thus, there’s national self-confidence that allows China to present its vision of what constitutes a proper financial system:

Xi Jinping: “Take the road of financial development with Chinese characteristics and build a financial power:” One:

Since the 18th National Congress of the Communist Party of China [2012], we have actively explored the laws of financial development in the new era, continuously deepened our understanding of the essence of socialist finance with Chinese characteristics, continuously promoted financial practice innovation, theoretical innovation and institutional innovation, accumulated valuable experience, and gradually embarked on a road of financial development with Chinese characteristics.

First, adhere to the centralized and unified leadership of the Party Central Committee over financial work. The party’s leadership is the most essential feature of the road to financial development with Chinese characteristics, and it is the greatest political and institutional advantage of our country’s financial development. The major achievements in our country’s financial development have always been achieved under the leadership of the Party. The root cause of many problems in the financial system lies in the ineffective implementation of the decisions and arrangements of the Party Central Committee by many units in the financial field, the lack of awareness and weakening of the implementation of the party’s leadership, the weak political construction of the party, and the construction of party style and clean government are not tightly grasped. Therefore, it is necessary to adhere to the centralized and unified leadership of the Party Central Committee over financial work, give full play to the party’s core leadership role in overseeing the overall situation and coordinating all parties, and ensure that financial work always moves in the right direction.

Second, adhere to the people-centered value orientation. The financial undertaking led by our party is to benefit the people in the final analysis, which is completely different from the essence of some countries’ finance serving capital and serving a few rich people. In the new era and new journey, financial work should stand firm on the people’s position, enhance the diversity, inclusiveness and accessibility of services, and better protect the rights and interests of financial consumers.

Third, adhere to the fundamental purpose of financial services for the real economy. The real economy is the foundation of finance, finance is the blood of the real economy, and serving the real economy is the duty of finance. If you are keen on self-circulation and self-expansion, finance will become a source of water and a tree without roots, and sooner or later it will cause a crisis. our country’s finance must keep its duty of serving the real economy and promote high-quality development.

Fourth, adhere to risk prevention and control as the eternal theme of financial work. Finance has both the functions of managing and diversifying risks but also has its own risk genes. The size and complexity of our country’s finance are not what they used to be, and the systemic correlation of risks has been greatly enhanced. It is necessary to enhance the awareness of dangers, do a good job in risk prevention and control, and enhance the resilience of the financial system.

Fifth, adhere to the promotion of financial innovation and development on the track of marketization and rule of law. Financial security depends on the system, vitality in the market, and order on the rule of law. Financial transactions involve complex and diverse rights and obligations, with information asymmetry and very high credit requirements, and must have a sound regulatory system. It is necessary to establish a sound system of financial laws and market rules and prohibit and prosecute violations to ensure the healthy operation of the financial market.

Sixth, persist in deepening the structural reform of the financial supply side. An important feature and advantage of our country’s financial system is that state-owned financial institutions are the main body, but there are problems such as the high proportion of indirect financing and debt financing, the lack of inclusiveness of financial services, and there are also financial generalization, arbitrary financial management, and a large number of illegal financial activities. In response to these problems, it is necessary to deepen the structural reform of the financial supply side, straighten out the relationship between indirect financing and direct financing, equity financing and debt financing, optimize the structure of the financial system, improve financial infrastructure, and improve the quality and efficiency of financial services.

Seventh, adhere to the overall planning of financial openness and security. Financial opening up must ensure national financial and economic security, not only to prevent the risks brought about by opening up itself, but also to prevent risks deliberately created by game opponents. It is necessary to grasp the rhythm and intensity of opening up, effectively improve financial supervision capabilities, and ensure a higher level of financial openness with a higher level of risk prevention and control.

Eighth, adhere to the general tone of seeking progress while maintaining stability. Financial work should adhere to the principle of seeking progress while maintaining stability, promoting stability through progress, and establishing first and then breaking down. It is necessary to stabilize the work, macroeconomic regulation, financial development, financial reform, financial supervision, risk disposal, etc., and the collection and release of financial policies should not be too hasty to prevent big ups and downs. At the same time, we must be proactive and enterprising, grasp what should be established, and continue to solve problems and move forward while stabilizing our position and basic situation. It is necessary to adhere to the soundness of monetary policy and flexibly use a variety of policy tools to promote stable and healthy macroeconomic development.

The above points clarify how to see and do financial work in the new era and new journey, which is an organic whole that reflects the basic position, views and methods of financial development with Chinese characteristics. The road of financial development with Chinese characteristics not only follows the objective laws of modern financial development, but also has distinctive characteristics suitable for our country’s national conditions, which is fundamentally different from the Western financial model. We must strengthen our self-confidence and continue to explore and improve in practice, so that this road will become wider and wider.

Two

At the Central Financial Work Conference, I put forward the goal of accelerating the construction of a financial power. What is a financial powerhouse? It should be based on a strong economic foundation, with world-leading economic strength, scientific and technological strength and comprehensive national strength, and a series of key core financial elements. First, it has a strong currency, which is widely used in international trade and investment and foreign exchange markets, and has the status of a global reserve currency. Second, it has a strong central bank with the ability to do a good job in monetary policy regulation and macroprudential management and prevent and resolve systemic risks in a timely and effective manner. Third, it has a strong financial institution with high operational efficiency, strong anti-risk ability, complete categories, global layout capabilities and international competitiveness. Fourth, it has a strong international financial center, which can attract global investors and influence the international pricing system. Fifth, it has strong financial supervision, sound financial rule of law, and has a strong voice and influence in the formulation of international financial rules. Sixth, it has a strong financial talent team. Although our country is already a financial power, the world’s largest in terms of bank volume and foreign exchange reserves, the second largest in the world in terms of bond market and stock market, and the scale of insurance is also among the best, but overall it is large but not strong. Building a financial power requires long-term vision and long-term efforts.

To build a financial power, we must accelerate the construction of a modern financial system with Chinese characteristics.

The first is a scientific and stable financial regulation and control system. It is necessary to build a modern central bank system, improve the framework of modern monetary policy with Chinese characteristics, improve the mechanism for regulating base currency and money supply, give full play to the total amount and structural functions of monetary and credit policy tools, and effectively maintain the value of the RMB and economic and financial stability.

The second is a well-structured financial market system. It is necessary to accelerate the construction of a safe, standardized, transparent, open, dynamic and resilient capital market. Develop a multi-level equity market, improve the quality of listed companies, and deepen the normalized delisting mechanism. Give full play to the role of venture capital and private equity investment in supporting scientific and technological innovation, and strengthen the functions of the bond market, money market, and foreign exchange market.

The third is the financial institution system with division of labor and cooperation. The key to our country’s financial institutions is to develop in a diversity that can complement each other’s advantages, and to perform their duties and show their strengths in serving the real economy. All types of financial institutions should stick to their original intentions, return to their roots, effectively enhance their competitiveness and service capabilities, and meet the diversified financial service needs of the real economy and the people at many levels.

Fourth, a complete and effective financial supervision system. Comprehensively strengthen financial supervision, strengthen institutional supervision, behavioral supervision, functional supervision, penetrating supervision, and continuous supervision, achieve full coverage of supervision, effectively improve the forward-looking, accurate, collaborative and effective supervision of supervision, and build a financial safety net.

Fifth, diversified and professional financial products and service systems. Strengthen high-quality financial services for major strategies, key areas, and weak links, do a good job in five major articles: science and technology finance, green finance, inclusive finance, pension finance, and digital finance, and accelerate the digital and intelligent transformation of finance.

Sixth, an independent, controllable, safe and efficient financial infrastructure system. Strengthen overall planning, improve market access, regulatory standards and operational requirements, and improve the level of autonomy of key financial infrastructure and the security and reliability of software and hardware.

Three

To promote high-quality financial development and build a financial power, we must adhere to the combination of the rule of law and moral governance, vigorously carry forward the excellent traditional Chinese culture, and actively cultivate a financial culture with Chinese characteristics.

First, we must be honest and trustworthy, and do not cross the bottom line. The excellent traditional Chinese culture emphasizes keeping promises. The financial industry is based on credit, and it is necessary to adhere to the spirit of contract and abide by market rules and professional ethics. It is necessary to carry forward the tradition of “iron abacus, iron ledger, and iron rules” and never make false accounts. Insist on repaying debts, cherish reputation, and don’t be lazy. It is necessary to strengthen industry self-discipline and ban seriously untrustworthy people for life.

Second, it is necessary to seek profit with righteousness, not just profit. The excellent traditional Chinese culture emphasizes that “righteousness before profit is honored, and profit before righteousness is humiliated”. Finance has the dual attributes of functionality and profitability, and profitability must be subordinated to the function. The financial industry should fulfill its social responsibilities and achieve symbiosis and co-prosperity between finance and the economy, society and the environment.

Third, we must be prudent and not rush for quick success. The excellent traditional Chinese culture emphasizes that “if you want to be fast, you will not achieve it, and if you see small benefits, you will not achieve great things”. The most important secret of some financial institutions in the world can become century-old stores and everlasting foundations is prudence. The financial industry should establish a correct view of operation, performance and risk, operate steadily and prudently, look at the present and the long term, not be greedy for short-term profits, not be impatient and rush, and do not take excessive risks beyond the capacity of the people.

Fourth, we must be upright and innovative, and do not deviate from the real to the virtual. The key is to solve the problem of who finance serves and why it innovates, and closely focus on better serving the real economy and facilitating the people to promote innovation.

Fifth, we must comply with the law and not act recklessly. Financial operations pay special attention to legal compliance. Financial institutions and practitioners should strictly abide by discipline and law, abide by financial regulatory requirements, consciously operate in accordance with the law within the scope of regulatory permission, and cannot rely on exploiting loopholes in laws and systems and circumventing supervision to pursue profits, let alone hit red lines, rush to the bottom line, and wander outside the law. [My Emphasis]

We must remember this is merely an excerpt from a longer speech that likely has contributing context.

Xi saved the most important points for the end, the moral and legal that must be obeyed if the temptation of corruption is to be avoided, or at minimum better supervised. Another reason for the delay in publication was the need to resolve the crisis caused by Evergrande, which is well described by Warwick Powell where he channels Xi Jinping by saying the financial shell must be anchored to the material core, the real economy. The metaphor that IMO best fits Xi’s description of how the system must be managed is that of sailing a ship, specifically an America’s Cup sloop, where every detail must be closely watched to gain the most efficiency and speed from the craft in the conditions presented. There’s diversity but also a team. Yes, the Party means the government; and as we’ve seen historically, finance must be very closely managed and regulated as the temptations to become immoral are very powerful. Employing traditional Chinese maxims is fine but they must be backed by very clear laws and enforcement. Yes, I’m echoing what Xi said. The behavior Evergrande’s management displayed proves the validity of all Xi’s points regarding supervision.

Xi’s opening relates to the international environment all financial systems must operate within where financial war is commonplace, corruption abounds and honor is rare. It would be wonderful if “seriously untrustworthy” nations could be “banned for life.” The new era will experience key changes in the international monetary and financial system as the old corrupt institutions get bypassed by new institutions managed by a new cadre. One point being made incorrectly is Xi saying China’s currency must become the global reserve currency. What he said was it must have the “status” of such a currency which it clearly has attained. China’s CIS clearing system (China International Payment System, or Cross-Border Interbank Payment System) is already very popular and its use is growing rapidly. (Pepe Escobar’s recent article digs into that and other related issues.) I addressed China’s reluctance to see the Yuan become the international reserve currency in a MoA comment made today:

In one of their early Geoeconomic Hour discussions, Radika Desai and Michael Hudson discussed why a national currency is unfit to be a sound reserve currency for international trade–unfit because it causes instability for the entire system. China understands that problem and thus doesn’t want the Yuan or any other national or even basket of national currencies to do the work of a reserve trading currency. Keynes is the only economist who worked on the problem and developed a solution that was rejected by the Outlaws at Bretton Woods because they had already determined how the Empire would control the world via its financial hegemony that commenced even before WW2 was over.

And that’s also why a BRICS currency won’t appear—the members are all at very different points of maturity with their economies and financial systems that make the issuing a of a secure currency implausible. Many are trying to come up with something better than Keynes but nothing viable has surfaced and quite likely won’t. The whys were discussed by Hudson and Desai while Hudson has explained it often in the many interviews he’s done over his career. Point 9 in this recent interview explains the Bancor along with the contemporary global economic situation. This 2+ year-old Hudson article also explains the overall problem, and many more exist online. One of the interesting points Xi makes is all debts must be paid, but he doesn’t say that unpayable loans shouldn’t be made. And one of the big problems China must deal with is the chronic problem of Global Debt where many nations are so mired in debt they cannot escape, very often as designed by the Outlaw US Empire.

Xi talked about domestic financial security but said little about the great need for the same internationally. China has taken the mantle of Global Leader in many areas, but in order to solve the chronic international problems China will need help. That means both SCO and BRICS must become global international political actors, not merely regional if those problems are to be solved. And here’s where we confront those who call themselves Communist but reject the teachings of the person designated the founder of Communist ideology—Karl Marx. Perhaps they should call themselves Chinese Communalists—the Communalist Party of China—a name that fits the ideology. After all, Xi emphasized the financial system must serve the needs of the people—all the people—which is the Chinese Community.

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