China sets up super financial regulator
July 17, 2017 Category Finance, Weekly
President Xi Jinping has ordered the establishment of a super regulator with powers to coordinate the supervision and management of financial stability to improve the country’s fragmented regulatory structure. The government will set up a Financial Stability Development Committee to coordinate between the regulators of banking, securities and insurance, while the People’s Bank of China (PBOC) will assume a bigger role in curbing risks. The decision was taken at the two-day National Financial Work Conference which is held about every five years since 1997. The eternal theme of financial work is to prevent systemic financial risks, which requires regulatory departments and local governments to monitor risks, as well as intervene to control the scale of local government debts, Xi said at the meeting. While tightening the reins on financial supervision, Xi also pledged to further promote reforms in the yuan’s exchange rate to promote its use in global trade and financial settlements. The PBOC will also maintain its prudential monetary policy, seeking a balance between the need to prop up economic growth, while prodding unprofitable industries to close and state enterprises to reduce borrowing. Xi also said the government should take stronger initiatives to monitor, warn against and deal with risks in a timely manner. All financial businesses will be put under supervision, added Premier Li Keqiang. China’s financial industry has grown rapidly in the past years, with its share in the country’s GDP reaching 8.4% in 2015, up from 4% in 2005, according to a Chinese Academy of Social Sciences (CASS) study. The financial industry’s expansion, coupled with credit easing to bolster growth, has led to rising systemic risks, capital speculation and a surge in shadow banking.
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