China strives to re­duce fi­nan­cial risk

China Daily (Hong Kong) - - BUSINESS -

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.

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