Banks should focus on real investment to support the economy

A key topic for discussion at this week's Two Sessions meetings will be how to carry out financial reform to reduce the risks of overcapacity in industries such as steel, cement, and real estate sectors and also to limit shadow banking and the so-called wealth management products - high return investment products that are often sold, but not guaranteed, by banks.

Recently, President Xi Jinping underscored that the financial reform should deepen supply side structural reform and strengthen the financial sector's ability to serve the real economy.

So, it is important to consider the effects on the real economies of the US and UK of the banking liberalizations carried out by those countries in the 1980s and 1990s. These reforms allowed banks to pay interest on deposits, created national mortgage markets, and deregulated prices of financial services.