Keep­ing fi­nan­cial risks at bay

China Daily (Hong Kong) - - COMMENT - — PEO­PLE’S DAILY

To defuse fi­nan­cial risks, es­pe­cially sys­temic ones, is a fun­da­men­tal task, and this ex­plains why China un­veiled a se­ries of re­form plans at a re­cent Na­tional Fi­nan­cial Work Con­fer­ence to safe­guard its fi­nan­cial se­cu­rity and pro­mote the fi­nan­cial sec­tor’s ef­fi­cient and sound op­er­a­tion to lu­bri­cate its sus­tain­able and healthy eco­nomic and so­cial de­vel­op­ment.

Since the 18th Na­tional Con­gress of the Com­mu­nist Party of China in late 2012, the top lead­er­ship has at­tached great im­por­tance to guard­ing against fi­nan­cial risks and taken a range of fi­nan­cial reg­u­la­tory mea­sures to bring fi­nan­cial risks un­der con­trol in China.

How­ever, the eco­nomic down­turn pres­sures at home and abroad, and the ac­cu­mu­lated struc­tural and sys­temic con­tra­dic­tions em­a­nat­ing from China’s new eco­nomic cy­cle, ex­ac­er­bated by deep­en­ing eco­nomic glob­al­iza­tion and spillover ef­fects of the global fi­nan­cial cri­sis, call for a strength­ened and more re­spon­sive fi­nan­cial regime to pre­empt fi­nan­cial risks.

Given that the sec­tor is sus­cep­ti­ble to any un­cer­tain­ties, acute risk aware­ness is needed. Pre­cau­tion­ary mea­sures should be taken to pre­vent not only “black swan” but also “gray rhino” events, and any mea­sure in­tro­duced should achieve tan­gi­ble ef­fects.

China should bet­ter con­trol the “chief valve” of credit to defuse a fi­nan­cial risk at the source. At the same time, it should im­prove its emer­gency re­sponse mech­a­nism and put in place a set of com­plete con­tin­gency mea­sures to pre­empt and ad­dress liq­uid­ity risks, credit risks, the risk of shadow bank­ing busi­ness, ab­nor­mal cap­i­tal mar­ket fluc­tu­a­tions and real es­tate bub­bles. It should also bet­ter su­per­vise emerg­ing on­line fi­nan­cial prod­ucts and ser­vices, which have largely fallen out­side the cur­rent su­per­vi­sory sys­tem.

China’s rich ex­pe­ri­ences in deal­ing with the Asian fi­nan­cial cri­sis and the global fi­nan­cial cri­sis, along with its full-fledged fi­nan­cial reg­u­la­tory regime, are ex­pected to help it ef­fec­tively defuse po­ten­tial fi­nan­cial risks and make the fi­nan­cial sec­tor bet­ter serve the real econ­omy.

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