New com­mit­tee key to fi­nan­cial sec­tor re­form and reg­u­la­tion

China Daily (USA) - - BUSINESS -

BEI­JING — China’s de­ci­sion to es­tab­lish a com­mit­tee to over­see fi­nan­cial sta­bil­ity and de­vel­op­ment will be key to re­form and co­or­di­nated reg­u­la­tion of the fi­nan­cial sec­tor, economists said.

“The rea­son why China has de­cided to launch a fi­nan­cial sta­bil­ity and de­vel­op­ment com­mit­tee is that it could shore up weak links in su­per­vi­sion and strengthen com­pre­hen­sive co­or­di­na­tion,” said Lian Ping, chief econ­o­mist with Bank of Com­mu­ni­ca­tions.

Given a frag­mented and seg­men­tary sys­tem might leave blind spots in su­per­vi­sion and lead to fi­nan­cial ar­bi­trage, the in­tro­duc­tion of the com­mit­tee will help im­prove the ef­fec­tive­ness of reg­u­la­tion and ad­dress reg­u­la­tion chal­lenges brought by in­creas­ingly mixed fi­nan­cial ser­vices, Lian said.

The fi­nan­cial sta­bil­ity and de­vel­op­ment com­mit­tee should be an au­thor­i­ta­tive de­ci­sion-mak­ing body rather than an ad­vi­sory body, ac­cord­ing to Lian.

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

The con­fer­ence also said the cen­tral bank will play a stronger role in macro pru­den­tial man­age­ment and guard­ing against sys­temic risks.

The role of the com­mit­tee and the func­tion of the cen­tral bank are com­ple­men­tary in terms of fi­nan­cial su­per­vi­sion, Lian said.

Xu Hong­cai, an econ­o­mist with the China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes, agreed with Lian, say­ing that China’s de­ci­sion to set up the com­mit­tee aimed to en­hance co­or­di­na­tion and im­prove weak links in fi­nan­cial over­sight.

Xu said a coun­try’s cen­tral bank plays a spe­cial role in its fi­nan­cial sys­tem, and the con­fer­ence high­lighted the cen­tral bank’s role in macro pru­den­tial man­age­ment and avoid­ing sys­temic risk.

The planned com­mit­tee will el­e­vate the level of fi­nan­cial su­per­vi­sion, en­abling the coun­try to bet­ter deal with fi­nan­cial risks from home and abroad and push for­ward eco­nomic re­struc­tur­ing, ac­cord­ing to Zhou Xiao­quan from Cen­tral China Se­cu­ri­ties.

The govern­ment will also en­hance the co­or­di­na­tion and con­nec­tiv­ity of fi­nan­cial in­fra­struc­ture and pro­mote shar­ing of sta­tis­tics and su­per­vi­sion in­for­ma­tion, ac­cord­ing to the con­fer­ence.

Tasks high­lighted at the con­fer­ence in­clude mak­ing the fi­nan­cial sec­tor bet­ter serve the real econ­omy, con­tain­ing fi­nan­cial risks and deep­en­ing fi­nan­cial re­forms.

The con­fer­ence has been con­vened ev­ery five years since 1997 and is widely con­sid­ered to set the tone for fi­nan­cial re­forms.

On the eve of the con­fer­ence this year, the Chi­nese in­sur­ance reg­u­la­tor warned of mul­ti­ple risks in the in­sur­ance in­dus­try, rang­ing from liq­uid­ity pres­sure to rep­u­ta­tion man­age­ment.

Chi­nese in­sur­ers grabbed head­lines by us­ing lever­aged money to buy shares in listed com­pa­nies, trig­ger­ing sharp volatil­ity in the mar­ket late last year.

Right be­fore the con­fer­ence, the coun­try’s se­cu­ri­ties reg­u­la­tor also ex­tended its mes­sage to strengthen over­sight on the se­cu­ri­ties mar­ket to keep it fair, open and im­par­tial.

“The reg­u­la­tor will con­tinue to crack down on vi­o­la­tions of se­cu­ri­ties laws and reg­u­la­tions, in­clud­ing in­sider trad­ing and mar­ket ma­nip­u­la­tion,” said Jiang Yang, vice-chair­man of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion in an ex­clu­sive in­ter­view with Xin­hua.

In April, China’s cen­tral lead­er­ship called for con­crete ef­forts to main­tain fi­nan­cial se­cu­rity, say­ing that fi­nan­cial vi­tal­ity would lead to eco­nomic vi­tal­ity, and fi­nan­cial sta­bil­ity is of key im­por­tance to eco­nomic sta­bil­ity.

Xu Hong­cai, an econ­o­mist with the China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes

Lian Ping, chief econ­o­mist with Bank of Com­mu­ni­ca­tions

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