Translated Abstract
At present, with the implementation of China’s “One Belt and One Road” initiatives, the economic development connections between Central Asia, West Asia, South Asia, North Africa and the Muslim minority areas in Midwest China are getting closer. Midwest China regions rely on Silk Road Economic Belt strategy to develop inland open economy, which have to face two realities. First, Islamic finance has become the main financial system in 48 Muslim countries, and is now playing an increasingly important bridge and linkage role in the international political, economic and financial cooperation. Second, facing Islamic finance have become the practical problem for implementing “One Belt and One Road” strategy. The introduction of Islamic finance is no longer an issue that can be dispensable or postponed indefinitely, but an unavoidable reality. How to learn from other countries regulatory experience, to explore the theoretical framework for international embedding of different financial system, to effectively control the financial risk of complementary coexist financial system on the basis of controllable inclusive perspective, has important theoretical and practical significance for our country to smoothly promote the westward open strategy, the internationalization of RMB, the diversification of financial system and the “One Belt and One Road” strategy,.
Based on the literature review and the review of institution transition theory, as well as major countries’ risk-based regulation practices on introduction of Islamic finance, the paper firstly sets up the theoretical analytical framework for the risk-based regulation after introducing Islamic finance, then empirically tests the influence of introducing Islamic finance on existing financial systems and controllable inclusion, and chooses some pilot banks for case studies of pressure test under the impact of macro risk factors, and finally puts forward some policy suggestions to facilitate the risk-based regulation on Islamic finance.
The main tasks and innovative aspects of this paper are as follows:
1) Different from the division of financial systems with a functional perspective, and regarding the comprehensive regulatory risks caused by the cross-border introduction of Islamic finance to China, the paper raises the concept, evaluation criteria and analytical framework of “controllable inclusion of financial system differences”, and applies them to solving the risk-based regulation problems after introducing Islamic Finance and improving China’s financial systems. It introduces the viewpoint that the function perspective cannot cover the differences behind the individualized or group beliefs demand and has answered the a long time existed dispute that our country＇s financial system has been able to meet the financial needs and there is no need to introduce other financial systems. Through literature review, the paper discovers that there are obvious deficiencies in applying traditional financial system risk sharing and financial system openness theories to the risk-based regulation research on the cross-border introduction of financial systems. The paper conducts a comparative analysis with clustering analysis methods on the risk-based regulation models of Islamic finance in Arab States, Non-Arab Islamic States and other Non-Islamic countries, and discusses the controllable inclusion of the cross-border introduction of different financial systems under different historical systems. Finally, the paper reaches the conclusion that the legal system is not a principal factor influencing the introduction of financial systems and invalidation of risk-based regulation, which provide a new perspective theory for the academic and financial regulators for using inclusive thinking to solve the problem of the path lock in the financial system in our country
2) The paper conducts VEC and VAR quantitative model analysis on the influence of introducing Islamic finance on China’s existing financial systems, reaches the conclusion that the impact effects of introducing Islamic finance on regional economy and finance, key influence factors and government regulation turn from negative to positive and gradually become stable, and then answers the question of boundary definition for the controllable inclusion after the cross-border introduction of non-mainstream financial systems. Based on the general and particular analyses on the strategic environment for introducing Islamic finance, the paper reveals the major regulatory risks generated from Islamic finance, empirically analyzes the inner connection and mutual impact effect between Islamic finance introduction and regional finances by using the data of the pilot banks and contrastive international Bank Islamic as samples and choosing key influence factors from Bank Islamic as variables, and confirms the analysis framework of evaluation standard, and provides a concrete and practical judgment method to analyze and judge the multinational implanted impact effect and impact of the financial system.
3) Under the complex system composed of financial and non-financial factors of how to analyze the differences of controllable inclusive financial system problems, the paper has carried on the analysis of system dynamics (SD) to obtain the conclusion of coupling subsystems and that adaptability can promote controllability, and to answer the question of whether there are coupling system and component factors between the risk uncontrollability and controllability of financial system embedding. The paper put forward that macro factors can be divided into the controllable inclusion of the differences of China-Arab economic financial system, the adaptability of Islamic finance to enter the Muslim area and the coupling development system, and uses DANAMO language to simulate, assess and test the coexist financial system environment that contains multiple macro risk factors, which provides system control cases for the financial system regulatory policy theory and the effects of ordering policy intervention that guides the transitions from non-controllability to controllability in practice.
4) In view of the existing financial system endurance capacity corresponding to the international financial system embedding pressure, taking the pilot Islamic bank as a case and by applying the extended MF-TB-Logistic Model, the paper designs and calibrates the compression situation of the existing financial system under the Islamic financial shock, and answers the question of how much tolerance the existing financial system in China has in facing of the introduction of Islamic finance. The paper designs the regular, general and special pressure case, conducts a Monte Carlo simulation pressure test of financial system stability for introducing Islamic finance, draws the conclusion that the existing financial system has strong tolerance under extreme stress scenarios of limited developed Islamic finance, and accordingly puts forward that the introduction of Islamic finance must adhere to the thesis that the risk supervision should be in risk using. It puts forward the policy advice that the non-choosing or delaying of introduction of controllable financial resources will affect the development of economy and finance. This provides the prospective application study strategy for our country to renew the idea of financial risk early warning system and the controllable inclusion of embedded financial system on the base of strengthening the principal financial system.
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