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China Daily (Hong Kong) - - FRONT PAGE -

The two-day Na­tional Fi­nan­cial Work Con­fer­ence, which ended in Bei­jing on Satur­day, made con­tain­ing fi­nan­cial risks one of the coun­try’s top pri­or­i­ties. The meet­ing, presided over by Pres­i­dent Xi Jin­ping, was held against the back­drop of grow­ing en­ter­prise debt, an over­heat­ing real es­tate mar­ket, and over­ca­pac­ity in such sec­tors as low-end man­u­fac­tur­ing. The debt of non-fi­nan­cial en­ter­prises in China reached 170 per­cent of its GDP in 2016, ac­cord­ing to the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and Devel­op­ment.

And in its 2017 China Fi­nan­cial Sta­bil­ity Re­port re­leased early this month, China’s cen­tral bank, Peo­ple’s Bank of China, pointed to “the risk of bub­bles” emerg­ing in some parts of the coun­try. The re­port notes that hous­ing loans com­prised a quar­ter of all loans, and ac­counted for 44.8 per­cent of all new lend­ing since the start of this year.

All this, as well as the risks in in­ter­bank and off-bal­ance sheet busi­ness, prompted the cen­tral bank to em­pha­size the need for strength­ened fi­nan­cial reg­u­la­tory ca­pa­bil­ity and bet­ter reg­u­la­tory co­or­di­na­tion in its re­port. Only through guard­ing against fi­nan­cial risks can a sound and sta­ble fi­nan­cial sec­tor bet­ter ful­fill its duty and pur­pose of serv­ing the real econ­omy.

The lack of co­op­er­a­tion among the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, the China Bank­ing Reg­u­la­tory Com­mis­sion and the China In­sur­ance Reg­u­la­tory Com­mis­sion was to blame for some of the prob­lems and po­ten­tial risks in the fi­nan­cial sec­tor and many be­lieve it has also en­cour­aged reg­u­la­tory ar­bi­trage and fu­eled the growth of risky fi­nan­cial prod­ucts.

Thus a com­mit­tee is to be set up un­der the State Coun­cil aimed at markedly im­prov­ing co­or­di­na­tion among the three agen­cies and pro­mot­ing greater shar­ing of in­for­ma­tion and plug­ging gaps in their over­sight.

De­spite some ring­ing the alarm bells, the risks in China’s fi­nan­cial sec­tor are con­trol­lable. Bad bank loans re­main at a low level, liq­uid­ity in the mar­ket is sta­ble, and sound eco­nomic growth in the first half of the year means the cen­tral bank does not need to con­tinue to ex­pand credit to spur growth, thus pro­vid­ing more lee­way for fi­nan­cial re­form mea­sures.

And the gov­ern­ment will con­tinue to delever­age the econ­omy by im­ple­ment­ing a firm and pru­dent mon­e­tary pol­icy, re­duce the lever­age of State-owned en­ter­prises and lo­cal gov­ern­ment debt, and crack down on fi­nan­cial irregularities.

As Xi said at the meet­ing, the gov­ern­ment must take the ini­tia­tive to mon­i­tor, warn against and deal with risks in a timely man­ner. The new com­mit­tee will help do these.

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