China strives to reduce financial risk

BEIJING — Risk control and serving the real economy will be the major tasks of China’s financial sector in the second half of the year.

Guarding against systemic financial risk is vital to the health of the economy and so the government will do more to monitor, predict and deal with risk in a more timely manner. Serving the real economy is the sole purpose of the financial sector and the most basic protection against financial risk.

While the central bank and financial regulators have identified major problems, including pseudo-banking and illegal fund-raising, China’s financial risk is seen as generally under control.

At the end of June, commercial banks’ average capital adequacy ratio stood at 13.2 percent. Liquidity coverage ratio was 124.4 percent, and the provision coverage ratio of commercial bank was 172.3 percent.

Financial risks mainly come from poor coordination between various regulators, according to Li Yang, director of the National Institution for Finance and Development. To deal with this, a new cabinet committee has been given responsibility for coordinating financial development and regulation.

The committee will ensure coherence between monetary, fiscal and industrial policies, targeting weak links in supervision. Specifically, the committee will improve risk monitoring and early-warning mechanisms, coordinate risk prevention and deal with structural and systemic issues.

Problems emerging from reform of the financial sector should be solved by the committee, said Dong Dengxin of the Wuhan University of Science and Technology.

More money was channeled into the real economy in the first half of the year. New private investment increased by 1.4 trillion yuan ($200 billion) from the same period a year ago to 11.2 trillion yuan.