Order Selection of Financial Liberalization for Transition Economies

Abstract

During the last three decades of the twentieth century, China had sought to reestablish its own financial system from the central-planed financial system. This paper takes financial liberalization, economic management and soft budget constraints in transition economies as objects of study, through analyzing one of the main characteristics of transition economies - soft budget constraint, urging that China should accelerate financial liberalization in order to defend its financial system from financial risks. China had been eager to establish incentive-compatibility mechanism but this should be revalued with sustainable development vision under the background of the global financial crisis.