A Systems Balance Approach Against Systematic Risks of China

Abstract

The current international and domestic situation is very complicated. Particularly modernization of China is an extremely complex systems project. Contradictions of imbalance in the systems must be solved by means of systems balance. Below we will take a look into the patterns of balance for systems movement, and the operation mode of the system balance approach against systematic risks of China. The change of systems (things) is always in a repeating process from imbalance to balance and re-balance. In this repeating process, there is a balance force that drives the contradictory movement of things and their change to correlate and interact with one another. A proper degree of system balance is a sign of wisdom to weigh pros and cons based on the interconnections of things. A state-level laboratory dedicated to social and economic systems’ integrated balance should be in place to meet the requirements for balanced market development. From the system balance perspective, risks and returns always exist together in the financial system. The key is to transfer risks that you are least sure of, reduce risks that cannot be transferred or are too expensive to transfer, and augment those that you can profit from, with minimum costs and maximum profits. The assets and debts in the financial system always follow the principle of equilibrium. To properly understand and handle the relations between assets and debts, equities and securities, we need to shift more attention from the scale to the quality of financial development, extend traditional financial functions of “deposit, trade facilitation and resource allocation” to new functions such as “corporate governance, signaling, and risk management”. We need to examine the RMB-USD relations in the context of the international community with a shared future. The internationalization of renminbi is not to challenge the leading role of the US dollar as an international currency, but to offer a necessary supplement and make constructive efforts for the balanced development of the international currency system.