Pol­icy moves boost long-term sta­bil­ity

China Daily (Hong Kong) - - BUSINESS - By LI XIANG in Bei­jing and CHEN WEIHUA in Wash­ing­ton lix­i­ang@chi­nadaily.com.cn

The cre­ation of a new fi­nan­cial sta­bil­ity com­mit­tee and a top pol­i­cy­mak­ers’ pledge to strengthen reg­u­la­tion at the na­tional fi­nan­cial meet­ing will help re­solve po­ten­tial sys­temic risks and sup­port the long-term sta­bil­ity of China’s fi­nan­cial sec­tor, a se­nior of­fi­cial and ex­perts said on Tues­day.

Lu Lei, head of the fi­nan­cial sta­bil­ity bureau of the Peo­ple’s Bank of China, said the new reg­u­la­tory body will help to co­or­di­nate China’s mon­e­tary, fis­cal and in­dus­trial poli­cies and ad­dress the lack of su­per­vi­sion in the coun­try’s fi­nan­cial mar­kets.

While over­all risks in China’s fi­nan­cial sec­tor are un­der con­trol, risks in non­per­form­ing loans, shadow bank­ing, the prop­erty mar­ket and the on­line fi­nan­cial mar­ket have been in­creas­ing, Lu said in an in­ter­view with Peo­ple’s Daily.

Pres­i­dent Xi Jin­ping an­nounced that China will set up a com­mit­tee un­der the State Coun­cil to over­see fi­nan­cial sta­bil­ity and de­vel­op­ment at a two-day Na­tional Fi­nan­cial Work Con­fer­ence that ended on Satur­day.

Lu said the com­mit­tee will help strengthen reg­u­la­tory co­or­di­na­tion and con­tain sys­temic risks while en­sur­ing the sound de­vel­op­ment of China’s fi­nan­cial sys­tem and its abil­ity to serve the real econ­omy.

China’s cen­tral bank said on Tues­day that it will main­tain a pru­dent mon­e­tary pol­icy and ful­fill its re­spon­si­bil­i­ties at the new fi­nan­cial sta­bil­ity com­mit­tee to re­solve risks and im­prove reg­u­la­tion co­or­di­na­tion.

Hu Yi­fan, chief China econ­o­mist at UBS Wealth Man­age­ment, said the fi­nan­cial meet­ing re­flected that main­tain­ing fi­nan­cial sta­bil­ity is a key pri­or­ity for China’s lead­er­ship, adding that the cen­tral bank will take a more prom­i­nent role in con­duct­ing risk as­sess­ments and as­sum­ing more ex­ec­u­tive su­per­vi­sion over fi­nan­cial sta­bil­ity.

“Sta­bil­ity re­mains above all the pri­or­ity for the lead­er­ship … as ‘risk’ was high­lighted fre­quently in the meet­ing,” Hu said.

“Delever­ag­ing ef­forts will con­tinue in the sec­ond half of this year, in our view, but the process should be done in a grad­ual man­ner and with more fo­cus on main­tain­ing fi­nan­cial sta­bil­ity,” he added.

Econ­o­mists said that the sta­ble growth of the Chi­nese econ­omy in the first half of the year will cre­ate suf­fi­cient room for pol­icy moves to mit­i­gate fi­nan­cial risks and deepen re­forms.

“Re­viv­ing mo­men­tum on the eco­nomic and fi­nan­cial re­form agenda will be es­sen­tial to mit­i­gate the build up of risks, par­tic­u­larly in the fi­nan­cial sys­tem, and to main­tain de­cent growth be­yond the next year or two,” said Eswar Prasad, a se­nior fel­low at the Brook­ings In­sti­tu­tion and for­mer head of the IMF’s China Di­vi­sion.

David Dol­lar, a se­nior fel­low of the John L. Thorn­ton China Cen­ter in the Brook­ings In­sti­tu­tion, said that the solid growth has en­abled the au­thor­i­ties to turn at­ten­tion to rein­ing in fi­nan­cial risks, which will choke off some bad in­vest­ments and al­low the coun­try to open up the econ­omy more.

The em­pha­sis on stricter reg­u­la­tion and the sup­port for the de­vel­op­ment of the di­rect fi­nanc­ing mar­ket by the pol­i­cy­mak­ers at the fi­nan­cial meet­ing will also help curb short-term spec­u­la­tion and will in turn be ben­e­fi­cial for the long-term sta­bil­ity of the A-share mar­ket, a re­port by Shang­hai Chongyang In­vest­ment Co said.

Lu Lei, head of the fi­nan­cial sta­bil­ity bureau of the Peo­ple’s Bank of China

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