Financial dispute prevention and resolution in China: synthesizing global experience

Abstract

In light of the recent global financial crisis, this article aims to critically examine China’s structure of financial dispute prevention and institutional dispute resolution mechanisms, and based on the results of such examination, set out suggested reform proposals for China. At present, in relation to financial dispute prevention through regulatory oversight, China adopts a traditional sectoral system of financial regulation, which has exhibited some limitations in meeting the regulatory challenges in a rapidly changing market. Its present system of financial dispute resolution similarly consists of segmented systems of arbitration, mediation and direct negotiation with financial institutions. In quest of a solution to the challenge of regulatory limitation and strengthened financial dispute resolution capacity, a comparative analysis is conducted of the financial regulatory and dispute resolution regimes in some advanced economies including the US, the UK and Australia, each of which is representative of a distinct regulatory model. In examining these overseas experiences for guidance, regard is given not only to their objective advantages and disadvantages, but also to the local conditions in China. It is concluded that the US regulatory model merits consideration in the short term, and with the further growth of China’s financial markets in the long run, the Australian model of both financial regulation and dispute resolution provides the preferred direction for reform.